Amortizing loans are the loans that have monthly payments and are quoted in terms of an ________ with ________ compounding.

Question

Quizplus · Accepted Answer

Amortizing loans are quoted in terms of an annual percentage rate (APR) but have monthly payments, which means the interest is compounded monthly. Option A is incorrect because effective rate is the rate actually paid or earned on an investment, and it applies to investments rather than loans. Option B is incorrect because there is no such thing as an equivalent rate, and the annual compounding is assumed for all loans unless explicitly stated otherwise. Option D is incorrect because a nominal rate is the stated rate without accounting for compounding, and semiannual compounding is not necessarily the case for all loans.

Amortizing Loans Are the Loans That Have Monthly Payments and Are