A $50,000 Loan Is to Be Amortized Over 7 Years

question 129

Multiple Choice

A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT?

• A) The cash flows for an ordinary (or deferred) annuity all occur at the beginning of the periods.
• B) If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity.
• C) The cash flows for an annuity due must all occur at the beginning of the periods.
• D) The cash flows for an annuity may vary from period to period, but they must occur at regular intervals, such as once a year or once a month.

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Definitions:

Yield Curve Spread

The difference in yields between two different debt instruments, often used to gauge economic expectations.

T-Bond Yield

The annual return investors earn on U.S. Treasury bonds, which is a benchmark for long-term interest rates.

Federal Funds Rate

The interest rate at which banks lend reserve balances to other banks overnight, determined by the Federal Reserve.

Top-Down Analysis

An investment strategy that starts with macroeconomic analysis to identify promising sectors or industries before selecting specific stocks.