Given a Positive Rate of Return and Multiple Time Periods,compound

question 74

Multiple Choice

Given a positive rate of return and multiple time periods,compound interest

• A)increases in an exponential manner.
• B)increases in a linear manner.
• C)produces the same future values as simple interest.
• D)provides future values that are less than those provided by simple interest.
• E)increases at a decreasing rate.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until its maturity date, accounting for interest payments and the repayment of the principal.

Market Price

The current cost for engaging in transactions involving assets or services.

Zero-Coupon Bond

A type of bond that does not pay periodic interest but is issued at a discount to its face value and matures at face value.

Duration

In finance, duration measures the sensitivity of the price of a bond or other fixed-income investment to a change in interest rates, reflecting the weighted average time until payments are received.