Which of the Following Statements Is CORRECT

question 56

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.