Which of the Following Is a True Statement

question 405

Multiple Choice

Which of the following is a true statement?

• A) When comparing investments it is best not to rely solely on quoted rates.
• B) Compounding will typically not lead to differences between quoted and effective rates.
• C) The APR on a loan requiring monthly payments is the annual interest rate you actually pay.
• D) An APR is the interest rate per period divided by the number of periods per year.
• E) With monthly compounding, the APR will be larger than the effective annual rate.

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Definitions:

Expected Return

The anticipated average return on an investment over a specific period based on historical data and market analysis.

Exclusion Ratio

In annuities, the proportion of payments considered as a return of the original investment and therefore not subject to income tax.

Life Annuity

A financial product that provides a guaranteed income for the remainder of the annuitant's life in exchange for an initial payment.

Annuity Payments

Periodic payments made to an individual, typically during retirement, derived from an annuity investment.