Which of the Following Statements Is True

question 2

Multiple Choice

Which of the following statements is true?

• A)Simple interest pays interest only on principle whereas compound interest also pays interest on interest.
• B)Simple interest relates to future value whereas compound interest relates to present value.
• C)Simple interest applies when an investor receives payment while compound interest applies when an investor makes payments.
• D)Simple interest annualises rates while compound interest allows interest to be stated in any time period.
• E)Simple interest relates to present value whereas compound interest relates to future value.

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Definitions:

Fair Value Adjustments

Adjustments to the reported value of an asset or liability to reflect its current market value.

Fair Value

The amount one would expect to receive from the sale of an asset or the cost to transfer a liability during a structured transaction among parties in the market as of the valuation date.

Financial Instruments

Contracts that give rise to both a financial asset of one entity and a financial liability or equity instrument of another entity, such as stocks, bonds, or derivatives.

Business Combination

A transaction or event in which an acquirer gains control over one or more businesses, typically through the acquisition of equity interests.