Which of the Following Statements Is CORRECT

question 26

Multiple Choice

Which of the following statements is CORRECT?

• A) The present value of a 3-year, $150 annuity due will exceed the present value of a 3-year, $150 ordinary annuity.
• B) If a loan has a nominal annual rate of 8%, then the effective rate can never be greater than 8%.
• C) If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different.
• D) The proportion of the payment that goes toward interest on a fully amortized loan increases over time.
• E) An investment that has a nominal rate of 6% with semiannual payments will have an effective rate that is smaller than 6%.

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Definitions:

Engagement Letter

A formal document outlining the scope of services to be provided by a professional firm, often used in accounting and legal services.

Contract

A contract is a legally binding agreement between two or more parties that outlines obligations, rights, and duties that each party agrees to perform or honor.

Near Privity Rule

A legal concept that extends liability for breach of warranty to individuals who may not be in direct contractual relationship but are close enough to the transaction to be considered in "near privity."

Accounting Liability

Financial obligations or debts that a business entity is legally responsible for and are recorded on its balance sheet.