The rate of interest agreed upon contractually charged by a lender or promised by a borrower is the ________ interest rate.
A) effective
B) nominal
C) discounted
D) continuous

Question

Quizplus · Accepted Answer

The nominal interest rate is the rate that is agreed upon contractually between the lender and the borrower. The effective interest rate takes into account the compounding of interest over time, while the discounted interest rate is the rate used to determine the present value of future cash flows. The continuous interest rate is used in continuous compounding and is not commonly used in practice.

The Rate of Interest Agreed Upon Contractually Charged by a Lender