Report effective annual rates or annual percentage rate

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1. Do you think that lending laws should require lenders to report Effective Annual Rates (EAR) or Annual Percentage Rates (APR)? Why? What are the impacts of EARs versus APRs to the borrowers?

2. How can you describe the ideal "trigger” for modeling the value of an embedded real option.

3. Suppose that JPMorgan Chase sells $100 million in Treasury bills to the Fed. Let the required reserve ratio in the economy be 20%. How does this transaction affect the T-accounts of the Fed and JPMorgan Chase? Explain.

Reference no: EM131925852

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