Which of the Following Correctly Describes an Interest Rate

question 43

Multiple Choice

Which of the following correctly describes an interest rate?

• A)It is the portion of the payment to an input supplier in excess of the minimum amount necessary to retain the input in its present use.
• B)It is paid by suppliers of loanable funds.
• C)It equates the value of future and present consumption.
• D)It is the price paid to purchase an asset.

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Definitions:

Perpetuity

A financial instrument that provides a stream of infinite cash flows or payments.

Compounded Monthly

Interest calculated on the initial principal and also on the accumulated interest of previous periods, done monthly.

RRSP

Registered Retirement Savings Plan, a tax-deferred savings account in Canada that allows individuals to save for retirement while potentially reducing their taxable income.

RRIF

Registered Retirement Income Fund, a tax-deferred retirement plan in Canada that an individual can use to generate income from the assets inside their Registered Retirement Savings Plan.