You are considering a home loan with monthly payments at an annual percentage yield of 5.116%. What is the quoted rate of interest on the loan?

Question

Quizplus · Accepted Answer

The quoted rate of interest on the loan is the Annual Percentage Rate (APR). To convert the APR to the annual percentage yield (APY), the compounding factor needs to be taken into account. In this case, since the monthly payments are being made, the compounding factor is 12. Using the following formula: APY = (1 + APR/12)^12 - 1, we get APY = (1 + 0.05116/12)^12 - 1 = 0.05116 or 5.116%. Therefore, the quoted rate of interest on the loan is 5%. Answer C is the best choice.

You Are Considering a Home Loan with Monthly Payments at an Annual