Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant? a. The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity. b. C. d. A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. A bank loan's nominal interest rate will always be equal to or greater than its effective annual rate. If an investment pays 10% interest, compounded quarterly, its effective annual rate will be greater than 10%. e. Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.
Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant? a. The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity. b. C. d. A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. A bank loan's nominal interest rate will always be equal to or greater than its effective annual rate. If an investment pays 10% interest, compounded quarterly, its effective annual rate will be greater than 10%. e. Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.
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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Transcribed Image Text:Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?
a.
The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity.
b.
C.
d.
A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar
20-year mortgage.
A bank loan's nominal interest rate will always be equal to or greater than its effective annual rate.
If an investment pays 10% interest, compounded quarterly, its effective annual rate will be greater than
10%.
e.
Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays
semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.
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