Ms Smith Borrowed $2,000 at an 8% Stated Rate of Interest

question 31

Multiple Choice

Ms. Smith borrowed $2,000 at an 8% stated rate of interest and was to pay back the loan in 24 monthly payments. What is her effective rate of interest using the installment loan formula?

• A) 10.5%
• B) 15.4%
• C) 18.9%
• D) 22.0%

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Definitions:

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange-traded funds.

Securities

Financial instruments representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives) that can be bought and sold.

Portfolio Beta

A measure of the volatility, or systematic risk, of a portfolio in comparison to the overall market.

Market Portfolio

A theoretical bundle of investments that contains all available assets in the market, used as a benchmark to assess individual investment performance.