Which of the Following Statements Is CORRECT, Assuming Positive Interest

question 15

Multiple Choice

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

• A) 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.
• B) the present value of a 5-year, $250 annuity due will be lower than the pv of a similar ordinary annuity.
• C) a 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage.
• D) a bank loan's nominal interest rate will always be equal to or greater than its effective annual rate.
• E) if an investment pays 10% interest, compounded quarterly, its effective annual rate will be greater than 10%.

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Definitions:

Money Market Funds

Investment funds that invest in short-term debt securities, such as treasury bills and commercial paper, offering investors high liquidity with a relatively low level of risk.

Prime Institutional

High-quality services or investment products catered to large institutional investors, typically offering premier levels of performance and service.

Construction Loans

Short-term loans used to finance the building of a property, with funds released incrementally as construction progresses.

Mortgage Trust

A type of investment trust that pools mortgage loans, offering investors a share in the income generated from these mortgages.