One Way to Characterize the Difference Between Compounding and Discounting

question 17

Multiple Choice

One way to characterize the difference between compounding and discounting is to say that

• A)compounding involves the assumption that the interest rate is zero,whereas discounting does not involve that assumption.
• B)discounting involves the assumption that the interest rate is zero,whereas compounding does not involve that assumption.
• C)the process of compounding produces a future value,whereas the process of discounting produces a present value.
• D)the process of compounding produces a present value,whereas the process of discounting produces a future value.

---

Definitions:

Substitution Effect

A phenomenon where consumers replace a more expensive item with a cheaper alternative when the price rises.

Product Quality

The attributes and characteristics of a product that determine its ability to satisfy customer needs and demands.

Property Crime

Crimes involving the theft of property or money without the use of force against the victim.

Legitimate Earnings

Legitimate earnings refer to income received from lawful and ethical business activities, operations, or professions, as opposed to profits derived from illicit or unethical activities.