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.

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Definitions:

Market Saturation

A situation in which a product or service has become so widespread that the market is considered fully served, limiting further growth.

Actual Market

The existing market where a company's products or services are currently being sold, as opposed to potential new markets.

Contribution Margin

The amount by which the sale of a product or service exceeds its production and selling costs, indicating how much contributes to covering fixed costs and generating profit.

Variable Cost

A cost that varies with the level of output or production, such as materials and labor costs.