Which of the Following Statements Is CORRECT,assuming Positive Interest Rates

question 54

Multiple Choice

Which of the following statements is CORRECT,assuming positive interest rates and holding other things constant?

• A) The present value of a 5-year,$250 annuity due will be lower than the PV of a similar ordinary annuity.
• B) A 30-year,$150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage.
• C) A bank loan's nominal interest rate will always be equal to or less than its effective annual rate.
• D) If an investment pays 10% interest,compounded annually,its effective annual rate will be less than 10%.
• E) Banks A and B offer the same nominal annual rate of interest,but A pays interest quarterly and B pays semiannually.Deposits in Bank B will provide the higher future value if you leave your funds on deposit.

---

Definitions:

Labor Force

The aggregate sum of individuals working or in pursuit of work within a nation or area.

Discouraged Workers

Individuals not actively seeking employment because they believe no jobs are available for them.

Frictional Unemployment

A type of unemployment that occurs when individuals are temporarily unemployed while moving between jobs, entering the workforce for the first time, or re-entering the workforce.

Discouraged Workers

Individuals not actively seeking employment due to believing no jobs are available for them or they would not qualify for the jobs that are available.