Which of the Following Statements About Compound Frequency Is Not

question 14

Multiple Choice

Which of the following statements about compound frequency is not true?

• A) Compounding frequency can only be annual, semi-annual or quarterly.
• B) The higher the compound frequency, the higher the future value will be.
• C) The relative increase in value from increasing compounding frequency seems to diminish with increasing frequencies.
• D) None of the above are untrue statements.

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Definitions:

Default Risk

Default risk is the chance that a borrower will be unable to make the required payments on their debt obligations.

Interest Rate Risk

The risk of loss to an investor from changes in the price of a bond that arise from changes in the market interest rate. Also called price risk and maturity risk.

Maturity Risk

Maturity risk pertains to the uncertainty and potential loss associated with holding a bond or other fixed-income investment until its maturity date.

Coupon

The percentage rate of interest a bond yields annually, based on its principal amount.