Which of the following statements are most likely to be false? The effective annual interest rate will always be greater than the quoted (or annual percentage) interest rate. All else being the same, the present value of a five-year, $10,000 annuity due will be higher than the present value of a five-year, $10,000 ordinary annuity. If you were depositing funds at a bank, and the quoted interest rate was 4% p.a., you would be better off if the bank used semi-annual compounding rather than quarterly compounding. a. I and II only. b. I and III only. c. II and III only. d. I, II and III.
Which of the following statements are most likely to be false? The effective annual interest rate will always be greater than the quoted (or annual percentage) interest rate. All else being the same, the present value of a five-year, $10,000 annuity due will be higher than the present value of a five-year, $10,000 ordinary annuity. If you were depositing funds at a bank, and the quoted interest rate was 4% p.a., you would be better off if the bank used semi-annual compounding rather than quarterly compounding. a. I and II only. b. I and III only. c. II and III only. d. I, II and III.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 31P
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Question
Which of the following statements are most likely to be false?
- The effective annual interest rate will always be greater than the quoted (or annual percentage) interest rate.
- All else being the same, the present value of a five-year, $10,000
annuity due will be higher than the present value of a five-year, $10,000 ordinary annuity. - If you were depositing funds at a bank, and the quoted interest rate was 4% p.a., you would be better off if the bank used semi-annual compounding rather than quarterly compounding.
a. I and II only.
b. I and III only.
c. II and III only.
d. I, II and III.
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