When Will a Future Value Calculated with a Simple Interest

question 17

Multiple Choice

When will a future value calculated with a simple interest rate exceed a future value calculated with compound interest at the same rate?

• A) When the interest rate exceeds 100% per annum
• B) When the investment period exceeds 50 years
• C) When the initial deposit exceeds $1 billion
• D) This is not possible with positive interest rates

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Definitions:

Outstanding Shares

Represents the total number of shares of stock that are currently owned by shareholders, including both public investors and restricted insider holdings.

Initial Public Offering (IPO)

The process by which a private company becomes publicly traded by offering its shares for sale to the public for the first time.

Underwriters

Professionals or companies that evaluate and assume the risk of another party in exchange for a premium, often used in the contexts of insurance and initial public offerings.

Offer Price

The price at which someone is willing to sell a security, asset, or commodity; also known as the ask price.