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Interest Rate Types & Risks Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. Calculate the effective annual rate for an interest rate of 10 percent calculated quarterly (4 times a year):

Question 2 2. Which of the following types of loans are not commonly associated with variable rate loans?

Question 3 3. Helen expects to receive $2000 in six months. Her bank offers loans at an annual rate of 5.60%. How much could she borrow now if she wants to be able to pay off the entire loan (including interest) with the $2000 she will receive in six months?

Question 4 4. Interest rate risk can affect:

Question 5 5. Which of the following is NOT a factor in the determination of an interest rate on borrowed money?

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Question 6 6. Calculate the effective annual rate for an interest rate of 10 percent with calculations done on a monthly basis:

Question 7 7. What is the economic term for the rate at which money loses value?

Question 8 8. What is the relationship between a borrower's credit score and their interest rate on a loan?

Question 9 9. The concern in reinvestment rate risk is:

Question 10 10. Which statement BEST summarizes the general history of interest rates?

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Question 11 11. Which of the following is the BEST definition of interest rates, according to this article?

Question 12 12. Two strategies for mitigating interest rate risk that don't depend on the types of bonds purchased are:

Question 13 13. Sam borrows $800 from the local bank, at an annual rate of 6.85%. The loan period is 37 weeks. How much money will he have to pay back at the end of the loan?

Question 14 14. Which of the following is a reason a lender would encourage a consumer to accept an adjustable rate mortgage?

Question 15 15. The primary reason to use financial futures contracts in hedging strategies is:

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Question 16 16. The stated interest rate from credit card companies is based on how many calculations per year?

Question 17 17. Which of the following is a benchmark interest rate commonly used to set rates?

Question 18 18. Rebecca wants to borrow $500 to buy her favorite video game player and a couple of games. She asks a friend to lend her this amount, offering to pay him back $548 in 9 months. What is the annual interest rate for this short term loan?

Question 19 19. What is the primary difference between a fixed and variable loan?

Question 20 20. When a variable interest rate is advertised as '5/1,' what do each of those numbers mean?

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Question 21 21. In 1970, McDonald's Big Mac costs around $0.50. By early 2015, the price of the sandwich was at $4.79. This change in cost is an example of:

Question 22 22. What does n equal in the formula for the effective annual rate if the calculations are done on a quarterly basis (4 times a year)?

Question 23 23. Your beginning balance is $1200. With an APR of 12 percent, what is your balance at the end of the year if calculations are done on a monthly basis?

Question 24 24. What is the future value of a loan of $2800 to be repaid in 8 months at an annual interest of 9%?

Question 25 25. Sean needs to borrow $1000 to fly to Europe in the summer. His friend Tim offers him a loan over two years, at an annual interest rate of 4%. He can also borrow the same amount from his bank at an annual rate of 5%, but the loan needs to be paid back in 18 months. In addition, his cousin offers to loan him the $1000, provided that Sean pay her back $1100 in two years. Which of the following statements is true?

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Question 26 26. Two types of bonds that were designed to eliminate reinvestment rate risk are:

Interest Rate Types & Risks Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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