Quantitative Methods: Rates and Returns

Effective interest rate

Market interest rate

Nominal interest rate (correct)

Expected interest rate

Interest rates are only relevant for equity instruments

Interest rates are always lower than required rates of return

Interest rates can be interpreted as required rates of return (correct)

Interest rates have no relationship with required rates of return

It is relevant only for calculating option values

It has no significant importance in finance

It only applies to fixed-income instruments

It is important for the no-arbitrage condition and calculating implied forward interest rates (correct)

<p>$e^{rT}$</p> Signup and view all the answers

<p>By linking together sub-period returns geometrically</p> Signup and view all the answers

<p>The current value of future cash flows discounted at a certain rate</p> Signup and view all the answers