Which of the Following Statements Is Most Correct

question 93

Multiple Choice

Which of the following statements is most correct?

• A)There is an inverse relation between the present value interest factor of an annuity and the future value interest factor of an annuity,i.e. ,one is the reciprocal of the other.
• B)The future value of an ordinary annuity can be determined as the product of the annual payment and the appropriate future value interest factor for an ordinary annuity.
• C)If a bank uses daily compounding for a savings account,the nominal rate will be greater than the effective annual rate.
• D)Each of the above statements is equally true.

Recognize how the firm's investment decisions are influenced by the NPV and cost of capital.

Understand the impact of risk on the cost of capital components and the overall WACC.

Understand the relationship between the returns required by investors and the firm's cost of capital components.

Recognize the significance of market values in calculating the cost of capital over book values.

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