Question

In just a few words, explain why the same financial institution would quote its mortgage rates...

In just a few words, explain why the same financial institution would quote its mortgage rates as an APR and its certificates of deposit with an APY

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

APY or EAR will always be more than APR, except in case of annual compounding. And both mortgage rates and certificates of deposit are compounded more frequently than annually. Hence, for both of them APY is more than APR. For a borrower, as in case of mortgage, seemingly lower rate would appear when APR is quoted and thus make it more attractive. Similarly, for a lender, as in case of certificates of deposit, seeingly higher rate would appear when APY is quoted and thus make it more attractive.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose a financial institution currently has a positive duration gap. How would its net worth be...
Suppose a financial institution currently has a positive duration gap. How would its net worth be expected to vary with changes in interest rates? Explain. Explain how a financial institution could “immunize” its net worth from changes in interest rates.
In just a few words please explain what would be a possible cause and effect for...
In just a few words please explain what would be a possible cause and effect for donating or selling organs?
Explain why Would you be more likely to buy a house if mortgage rates rise from...
Explain why Would you be more likely to buy a house if mortgage rates rise from 4% to 6% and house prices fall 4% to 2%? Please explain
A mortgage specialist would like to analyze the average mortgage rates for Atlanta, Georgia. He collects...
A mortgage specialist would like to analyze the average mortgage rates for Atlanta, Georgia. He collects data on the annual percentage rates (APR in %) for 30-year fixed loans as shown in the following table. If he is willing to assume that these rates are randomly drawn from a normally distributed population, can he conclude that the mean mortgage rate for the population exceeds 4.2%? Test the hypothesis at the 10% level of significance. (You may find it useful to...
A mortgage specialist would like to analyze the average mortgage rates for Atlanta, Georgia. He collects...
A mortgage specialist would like to analyze the average mortgage rates for Atlanta, Georgia. He collects data on the annual percentage rates (APR in %) for 30-year fixed loans as shown in the following table. If he is willing to assume that these rates are randomly drawn from a normally distributed population, can he conclude that the mean mortgage rate for the population exceeds 4.45%? Test the hypothesis at a 1% level of significance. (You may find it useful to...
Explain why a business taxpayer that uses GAAP for financial reporting would end up with “book-tax...
Explain why a business taxpayer that uses GAAP for financial reporting would end up with “book-tax differences” relating to the depreciation of balance-sheet assets. In other words, how do GAAP and tax depreciation differ? Identify and briefly explain at least two major differences.
Question #5 John works at a financial institution in the United States and his job profile...
Question #5 John works at a financial institution in the United States and his job profile makes him interact with the various components of the nation’s financial system. He is of the view that a nation’s citizenry is better-off when everyone is self-sufficient and no one needs to borrow from or lend to someone to succeed in their respective ventures. In fact, he comes from a family background that considers borrowing to be an embarrassment. To be debt-free is what...
2) If time has value, why are financial institutions often willing to extend you a 30-year...
2) If time has value, why are financial institutions often willing to extend you a 30-year mortgage at a lower annual interest rate than they would charge for a one-year loan? a) With a mortgage, the house you purchase acts as collateral for the loan. This reduces the risk associated with the loan and so reduces the compensation the bank requires. b) Because time has value, banks charge a lower interest rate on mortgages because they receive repayments for 30...
Employee stock ownership plans (ESOPs) Why would a firm be willing to establish an employee stock...
Employee stock ownership plans (ESOPs) Why would a firm be willing to establish an employee stock ownership plan (ESOP)? Check all that apply. a. Cash dividends paid on ESOP stock are tax deductible if the dividends are used to repay the loan that established the ESOP. b. It is common for financial institutions to loan money to ESOPs at below-market interest rates. c. Employers are not required to match Social Security and Medicare taxes withheld from employees’ paychecks when the...
Read the RBA’s May 2020 interest rate decision: Explain: Your understanding of why the RBA made...
Read the RBA’s May 2020 interest rate decision: Explain: Your understanding of why the RBA made the decision that they did, with respect to the content of the interest rate decision statement itself and also the RBA’s policy objectives What the RBA’s monetary policy decision means in terms of practical implementation The expected transmission of the monetary policy decision to economic outcomes Statement by Philip Lowe, Governor: Monetary Policy Decision Number2020-13 Date5 May 2020 At its meeting today, the Board...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT