I. Simple interest calculations assume the interest earned is never reinvested. II. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. III. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.

I. Simple interest calculations assume the interest earned is never reinvested. II. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. III. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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An annuity due is an annuity for which: Question 10 options: A) the payments are made to repay a loan B) the payments are made at the beginning of each payment period C) the payments continue forever D) the payments are made at the end of each payment period E) the payment period is not the same as the conversion period
a. What interest rate would make it worthwhile to incur a compensating balance of $15,500 in order to get a 0.65-percent lower interest rate on a 2-year, pure discount loan of $230,000? b. Is it worth incurring the compensating balance to obtain the lower rate? Complete this question by entering your answers in the tabs below. Required A Required B What interest rate would make it worthwhile to incur a compensating balance of $7,500 in order to get a 0.65-percent lower interest rate on a 2-year, pure discount loan of $150,000? Note: Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. Interest rate %
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The following table gives 5 daily closing prices of a stock in Dec 2021.The 2-day simple gross return of holding the stock from Dec 12 to Dec 14 is: () Date Dec 11 Dec 12 Dec 13 Dec 15 188.84 Dec 14 Price(S) 191.23 192.28 190.70 190.80 A) -0.0077 B 1.0078 0.0078 0.9923 | 7. Consider the following MA(1) model: X,=1+u,+0.5u,, where (u, is a white noise with mean 0 and variance 0.4. The mean E(X,) is 输入答案 and the variance Var (X,) is 输入答案 | 8.:.. MA model is always weakly stationary. () (x)
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Scenario 1: Individual Retirement Accounts (IRAs) allow people to shelter some of their income from taxation. Suppose the maximum annual contribution to such accounts is $5,000 per person. Now suppose there is a decrease in the maximum contribution, from $5,000 to $3,000 per year. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to .
Which of the following statements is CORRECT? Question 2 options: a) The proportion of the payment that goes toward interest on a fully amortized loan increases over time. b) An investment that has a nomiral rate of 6% with semiannual payments will have an effective rate that is smaller than 6%. c) If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different. d) The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due. e) if a loan has a nominal annual rate of 7%, then the effective rate will never be less than 7%.
The Present or Future value of an Annuity Due is always lower than that of ordinary annuity. True B) False Jy
Assess the following statements: Simple interest calculations assume the interest earned is never reinvested. The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows. a. Three statements are incorrect. b. Two statements are incorrect. c. Only one statement is incorrect. d. All statements are correct.
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