Question

If a loan has a variable interest margin of 0.8% that is currently linked to the federal funds rate of 8.1%, what is the current interest rate on this loan?

a
7.3%
b
8.9%
c
8.1%
d
9.3%

Answer 1

Answer: C

Step-by-step explanation:

To determine the current interest rate on the loan with a variable interest margin linked to the federal funds rate, you simply add the variable interest margin to the current federal funds rate:

Current Interest Rate = Federal Funds Rate + Variable Interest Margin

Current Interest Rate = 8.1% + 0.8% (0.8% is equivalent to 0.008 in decimal form)

Current Interest Rate = 8.1% + 0.008 = 8.108%

So, the current interest rate on this loan is 8.108%.