Which of the Following Statements Is FALSE About Interest Rates

question 99

Multiple Choice

Which of the following statements is FALSE about interest rates?

• A) As interest rates may be quoted for different time intervals, it is often necessary to adjust the interest rate to a time period that matches that of cash flows.
• B) The effective annual rate indicates the amount of interest that will be earned at the end of one year.
• C) The annual percentage rate indicates the amount of simple interest earned in one year.
• D) The annual percentage rate indicates the amount of interest including the effect of compounding.

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Definitions:

Competence

The ability to do something successfully or efficiently, involving skills and knowledge.

Confidence

A feeling of self-assurance arising from an appreciation of one’s own abilities or qualities.

Mediocrity

The quality of being average or moderate in quality, not outstanding or poor.

Sincerity

The quality of being free from pretense, deceit, or hypocrisy; genuine honesty.