Question
20. Gomez Electronics needs to arrange financing for its expansion program. Bank A offers to lend Gomez the required funds on a loan where interest
20. Gomez Electronics needs to arrange financing for its expansion program. Bank A offers to lend Gomez the required funds on a loan where interest must be paid monthly, and the quoted rate is 12 percent. Bank B will charge 9 percent, with interest compounded semi-annually. What is the difference in the effective annual rates charged by the two banks? (a) 3.68%. (b) 0.50%. (c) 3.48%. (d) 1.25%.
21. What is the real rate of return for the investment if the nominal rate of return is 12% and the expected inflation rate is 4%? (a) 7.69%. (b) 16.48%. (c) 9.28%. (d) 11.45%.
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