Which of the Following Statements Is Correct

question 98

Multiple Choice

Which of the following statements is correct?

• A) Cash flow time lines are helpful graphical displays for situations involving simple annual interest but are not useful when time periods are more frequent than annual.
• B) The future value of an annuity due is equal to the future value of an otherwise identical regular annuity with interest compounded on each payment for one additional period.
• C) There is no precise method of calculating either present values or future values when fractional time periods are involved.We must instead use rough approximations.
• D) The terminal value of a stream of uneven cash flows is found by simply summing up all the cash flows.
• E) The annual percentage rate (APR)cannot be equivalent to the effective annual rate (EAR).

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Definitions:

Annuity Factor

A multiplier used to calculate the present value of an annuity, representing the sum of the present values of all future annuity payments.

Interest Rate

The percentage charged on the total amount of borrowed money or paid on invested capital.

Compounding Periods

The frequency with which interest is added to the principal balance of a financial instrument, affecting the total interest earned or paid over time.

Periodic Payments

Regular payments made over a determined period, such as monthly rent or mortgage payments.