The Difference in Computing the Effective Interest Rate for Non-Interest-Bearing

question 118

Multiple Choice

The difference in computing the effective interest rate for non-interest-bearing obligations as compared to installment obligations is

• A)one has an effective interest rate of zero, while the other is determined using present value factors.
• B)one uses the 'present value of a single sum' table and the other uses the 'present value of an ordinary annuity' table.
• C)one is based on the market rate of interest, while the other is based on a stated rate of interest.
• D)determined by the length of the debt maturity period.

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