Which of the Following Statements Is CORRECT, Assuming Positive Interest

question 54

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 less than its effective annual rate.
• E) if an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%.

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Definitions:

Solomon Asch

A psychologist best known for his research on conformity and group pressure.

Group Size

The number of individuals forming a social or working group, affecting its dynamics, interactions, and outcomes.

Conformity

The act of aligning one's beliefs, attitudes, and behaviors with those of a group or society's norms and expectations.

Solomon Asch

A psychologist best known for his research on conformity, demonstrating how social pressure can influence individuals to conform to incorrect answers.