Which of the Following Statements Is CORRECT

question 25

Multiple Choice

Which of the following statements is CORRECT?

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

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Definitions:

Polite

Showing consideration for others in manners, behavior, and speech.

Well-mannered

Descriptive of an individual exhibiting polite, courteous, and socially appropriate behavior.

Prudent

Acting with or showing care and thought for the future, often in personal or financial decisions.

Conscious

Being aware of one's surroundings and of one’s thoughts and sensations; awake.