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:

Regression Analysis

Regression Analysis is a statistical technique for estimating the relationships among variables, often used to determine how dependent variables are influenced by one or more independent variables.

Dependent Variable

The variable in an experiment or model whose value depends on the values of one or more independent variables.

Linear Relationship

A type of relationship between two variables where the relationship can be graphically represented by a straight line, indicating a constant rate of change.

Causal Relationship

A connection between two variables where a change in one variable is responsible for a change in another variable.