These are general finance questions, please follow these formulas to solve problems.

8. Periodic Interest Rate, r = APR / m

9. EAR = (1 + APR/m)^m - 1

10. r r* + h

11. r = r* + h + (r* h) (1 + r) = (1 + r*)(1 + h)

12. r = r* + inf + dp + mp

1. List 3 names for the party for whom the interest rate is considered to be a reward. How is it a reward?

2. List 3 names for the party for whom the interest rate is considered to be a penalty. How is it a penalty?

3. Go to www.stlouisfed.org then Research and Data then FRED Economic Data then in search window, 3-Month Treasury Bill: Secondary Market Rate then click on 3-Month Treasury Bill: Secondary Market Rate. For Frequency Pick Annual. Slide cursor along graph to find annual values. What was the annual yield in 1981 and in 2014? Why the big difference? 4. Go to www.stlouisfed.org then Research and Data then FRED Economic Data then in search window Consumer Price Index for All Urban Consumers: All Items then click on Consumer Price Index for All Urban Consumers: All Items. For frequency pick Annual. Slide cursor along graph to find annual values. Find the annual CPI index level for the year in which you were born and for 2014. What is the total percent change from your birth year to 2014? What is the compounded annual rate of change? By what annual percent would someones disposable income have to have changed over that same period in order for their real income to have gone up?

5. For a nominal interest rate of 8% and inflation of 5%, what is the (a) approximate real rate and (b) precise real rate?

6. Given the annual increase in the CPI from #4, if you wanted an annual average increase of 3% in your purchasing power over the period in question, (a) What approximate annual nominal rate would you have to have earned; and (b) What precise nominal rate?

7. Make up numbers to correctly complete the following: "At a price of $___ each, you have enough money to buy ____ shirts today. If you expect the price of shirts to increase by ____%, you would have to earn a precise nominal rate of ____% in order to be able to purchase _____ shirts one year from now."