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  1. The nominal (quoted) annual interest rate on an automobile loan is 10%. The effective annual rate of the loan is 10.47%. The frequency of compounding periods per year for the loan is closest to:
  A. weekly.
  B. monthly.
  C. quarterly.
  2. Equity return series are best described as, for the most part:
  A. platykurtotic (less peaked than a normal distribution).
  B. leptokurtotic (more peaked than a normal distribution).
  C. mesokurtotic (identical to the normal distribution in peakedness).
  Answers:
  1、B
  解析:is correct. Use the formula for effective annual rate:
  EAR = (1 + Periodic interest rate)m – 1.
  Iteratively substitute the possible frequency of compounding until the EAR is 10.47%. For weekly compounding, (1 + 0.10/52)52 – 1 = 0.10506 = 10.51%
  For monthly compounding, (1 + 0.10/12)12 – 1 = 0.10471 = 10.47%
  For quarterly compounding, (1 + 0.10/4)4 – 1 = 0.10381 = 10.38%
  Thus, the correct answer is monthly compounding.
  2、B
  解析:is correct. Most equity return series have been found to be leptokurtotic.
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