Sample FE Exam Problems

1. An interest rate of 1% per month is the same as:

   1. Nominal 3% per quarter compounded monthly.
   2. Effective 12.683% per year compounded monthly.
   3. Nominal 12% per year compounded monthly.
   4. All of the above.
    

2. An interest rate of effective 12% per year compounded monthly is nearest to:

   1. 1% per month.
   2. 3.04% per quarter.
   3. 6.15% per semiannual period.
   4. Nominal 11.39% per year compounded monthly.
    

3. When interest is compounded continuously:

   1. The cash flow must also occur continuously.
   2. The cash flow must be converted into continuous cash flow.
   3. The interest rate must be converted into an annual rate.
   4. None of the above.
    

4. An interest rate stated as nominal 12% per year compounded quarterly is the same as:

   1. effective 1% per month.
   2. nominal 1% per month.
   3. 3% per quarter.
   4. 12.68% per year.
    

5. An interest rate of 12% per year compounded continuously is the same as:

   1. Nominal 1% per month compounded continuously.
   2. Effective 1.08% per month compounded continuously.
   3. Effective 12.683% per year compounded continuously.
   4. None of the above