Interest Rates

What’s inside

• What does an annual interest rate of 5% generally mean on a savings account?
• Which statement best describes compound interest?
• What is the main difference between a fixed interest rate and a variable interest rate?
• Why is the annual percentage rate (APR) useful when comparing loans?
• Match each interest-rate concept with its most accurate description.
• Match each borrower situation with the interest-rate feature most relevant to it.
• Match each factor with its usual effect on a loan.
• Match each central-bank action with its most likely direct effect on market interest rates, all else equal.