Which of the Following Statements Is CORRECT,assuming Positive Interest Rates

question 32

Multiple Choice

Which of the following statements is CORRECT,assuming positive interest rates and holding other things constant?

• A) The present value of a 5-year,$250 annuity due will be lower than the PV of a similar ordinary annuity.
• B) A 30-year,$150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage.
• C) A bank loan's nominal interest rate will always be equal to or greater than its effective annual rate.
• D) If an investment pays 10% interest,compounded quarterly,its effective annual rate will be greater than 10%.
• E) Banks A and B offer the same nominal annual rate of interest,but A pays interest quarterly and B pays semiannually.Deposits in Bank B will provide the higher future value if you leave your funds on deposit.

---

Definitions:

Inside Trades

Transactions in a company's securities made by its officers, directors, or holders of more than 10% of the stock, typically subjected to strict regulatory scrutiny.

Public

Pertaining to or involving the affairs of the community as a whole, often relating to government or public companies accessible to all people.

Semistrong-Form Efficient

A market hypothesis stating that share prices incorporate all publicly available information, making it impossible to consistently achieve higher returns.

Weak-Form Efficient

A market hypothesis suggesting that all past prices of stock are reflected in the current price, hence historical data cannot be used to predict future prices.