Question

True or False? Greater compounding frequency will result in a larger present value

Answer #1

False , compounding is the method of allocating the interest portion to present value on bsis of daily. monthly, semiannually or yearly. The future value after compoundign will be highest on daily basis and lowest at yearly basis if all other things remain constant.. The other things are rate of return and pricipal value. So compounding frequency decide higher result or lower result. Present value is concerned with the discounting . And as higher the frequency that higher the result whether for present value calculation or future value calculation.

so the above statement is false. Greater frequency will result in a larger value but compounding related with present value not with future value.

please ask if any query.

Greater compounding frequency will result in a larger present
value.
True or false

1. A higher p-value corresponds to higher confidence in the
stated result. True or False?
2. The function "errorbar()" is used to calculate standard
errors of means (which are often used in plots with error bars).
True or False?
3. For a given data set, the 80% confidence interval for the
mean is going to be larger than the 90% confidence interval for the
mean. True or False?
4. For a given data set, the 90% confidence interval for the...

1(a). (TRUE or FALSE?) The smallest compounding period is used
when we do continuous compounding.
1(b).(TRUE or FALSE?) The annuity is a series of unequal cash
flows, spaced unevenly over time.
1(c).(TRUE or FALSE?) Money grows over time when the interest
rate is zero.

1. The future value of a present sum increases as either the
discount rate or the number of periods per year increases, other
things held constant.
True or False
2.It is always desirable to have a higher compounding frequency,
regardless of the initial investment or the time horizon.
True or False
3.A perpetuity is a level stream of evenly spaced cash flows
that never ends.
True or False

8. True or False. The net present value of one project cannot be
compared to the net present value of another project unless the
investments required for each are equal.
a. True
B. False
9. True or False. Benefits for using payback for analyzing
projects are a) it is easy to calculate and b) it ignores the time
value of money.
a. True
b. False
10. True or False. In the heading of a Statement of Cash Flow,
the time...

True or False?
If market interest rate falls to zero, then bonds can be issued
at zero coupon rates and their market values would be zero.
FALSE
Interest rate risk for bonds decreases as bond maturity
decreases and as the frequency of bond interest payments rises.
TRUE
The fair market value of a stock rises with the expected
dividend growth rate. FALSE
Companies interested in maximizing shareholder value should
choose capital projects with a Net Present Value of at least...

If a bank uses quarterly compounding for savings accounts, the
nominal rate will be greater than the effective annual rate. a.
True b. False

True or False
1. Suppose you are given a positive discount (or
interest/compound) rate. If you calculated the PV (present value)
of a series of equal cash flows, it will always exceed the FV
(future value) of the same series of cash flows.
2. All else equal, the PV (present value) of an annual ordinary
annuity (i.e cash flows only happen at end of each year) increases
as the frequency of compounding (# of periods per year)
increases.
3. It...

TRUE OR FALSE: Present Value of Growth Opportunities (PVGO) can
only take on a positive value

Present Value for Various Compounding
Periods
Find the present value of $500 due in the future under each of
the following conditions. Do not round intermediate calculations.
Round your answers to the nearest cent.
9% nominal rate, semiannual compounding, discounted back 5
years.
$
9% nominal rate, quarterly compounding, discounted back 5
years.
$
9% nominal rate, monthly compounding, discounted back 1
year.
$

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 4 minutes ago

asked 25 minutes ago

asked 28 minutes ago

asked 28 minutes ago

asked 28 minutes ago

asked 32 minutes ago

asked 35 minutes ago

asked 45 minutes ago

asked 51 minutes ago

asked 51 minutes ago

asked 51 minutes ago