Suppose Community Bank Offers to Lend You $10,000 for One

question 100

Multiple Choice

Suppose Community Bank offers to lend you $10,000 for one year at a nominal annual rate of 17.75%,but you must make interest payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year.What is the effective annual rate on the loan?

• A) 21.43%
• B) 19.73%
• C) 20.10%
• D) 18.97%
• E) 16.50%

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Definitions:

Ultimatum Game

A behavioral economics game in which a mutually anonymous pair of players interact to determine how an amount of money is to be split. The first player suggests a division. The second player either accepts that proposal (in which case the split is made accordingly) or rejects it (in which case neither player gets anything).

Dictator Game

An experimental game in economics where one player, the "dictator," determines how to divide an endowment (such as a sum of money) between themselves and the second player, studying social preferences like altruism.

Total Control

A situation where all aspects of a process or system are under the direct authority and regulation of a single entity.

Dictator Game

A behavioral economic experiment where one participant, the "dictator," determines how to split an amount of money between themselves and another participant.