Question

Which of the following statements is true? Group of answer choices Everything else constant, the value...

Which of the following statements is true?

Group of answer choices Everything else constant, the value of a given perpetuity today is greater than the value of the same perpetuity next year.

For an amortization with fixed principal payment, the amount of interest paid stays constant over time.

For an amortization with fixed payment, the amount of principal paid is constant over time. Effective Annual Rate is always greater than Annual Percentage Rate.

As a lender, you would prefer an APR of 18% with monthly compounding to an APR of 19% with annual compounding on your savings account

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

True :As a lender, you would prefer an APR of 18% with monthly compounding to an APR of 19% with annual compounding on your savings account

EAR = (1 + APR/m) ^m - 1 , where m = monthly compounding

EAR = (1+ 0.18/12)^12 - 1 = 1.1956 - 1 = 0.1956 = 19.56%

19.56% is higher than 19% , so it is true statement  

Other statements are wrong:

In amortization, interest payment decreases as payments are made because interest is calculated on outstanding balance.

secondly, value of perpetuity will remain same.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Everything else held constant, an investment project will be more desirable Group of answer choices the...
Everything else held constant, an investment project will be more desirable Group of answer choices the higher its required rate of return. the greater and less certain its cash flows. the greater and more certain its cash flows. the higher the marginal tax rate. Two of these are correct.
Which of the following is true when comparing two loans for the same amount of money...
Which of the following is true when comparing two loans for the same amount of money at the same interest rate for the same amount of time, but with different payment frequencies? Group of answer choices Annual payments are less than the total of a year's worth of monthly payments Total interest paid in a year for a loan with monthly payments is less than the total interest paid in a year for a loan with annual payments Total principal...
Which of the following events (everything else constant) would cause a decrease in nominal interest rates?...
Which of the following events (everything else constant) would cause a decrease in nominal interest rates? a. There is an increase in expected inflation b. Households dramatically increase their savings rate c. Corporations see an increase in investment opportunities. d. The government runs a larger than expected budget deficit
Which of the following statements is incorrect regarding the constant growth model? Group of answer choices...
Which of the following statements is incorrect regarding the constant growth model? Group of answer choices If the dividend growth rate is zero, the constant growth model becomes a zero-growth valuation model. The constant growth model can still be used if the required rate of return is less than the dividend growth rate. Another name for the dividend to be received in one year divided by the current stock price is the expected dividend yield. The constant growth model calculates...
Which of the following statements is true? Group of answer choices The payback investment rule is...
Which of the following statements is true? Group of answer choices The payback investment rule is based on the notion that an opportunity that pays back its initial investments quickly is not a good idea An internal rate of return (IRR) can’t be a negative number for an investment opportunity. Net present value (NPV) always is less reliable than IRR for an investment opportunity. In general, there can be as many internal rates of return (IRRs) as the number of...
Which one of the following statements is TRUE? Group of answer choices When the required return...
Which one of the following statements is TRUE? Group of answer choices When the required return is less than the internal rate of return, net present value is positive. When the IRR is greater than the required return, the net present value is negative. If projects are mutually exclusive, you should always select the project with the greatest IRR. Projects with conventional cash flows have multiple internal rates of return.
Which of the following statements about a bond is true? Group of answer choices A. If...
Which of the following statements about a bond is true? Group of answer choices A. If the yield curve is downward sloping, long-term yields are lower than short-term yields because market interest rates are expected to decrease. B. If the yield curve is downward sloping, long-term yields are lower than short-term yields because market interest rates are expected to increase C.The value of a bond cannot be traded in the market at its face value D. All else being equal,...
An amortization table reports the amount of interest and principal contained within each regularly scheduled payment...
An amortization table reports the amount of interest and principal contained within each regularly scheduled payment used to repay an amortized loan. Example Amortization Schedule Year Beginning Amount Payment Interest Repayment of Principal Ending Balance 1 2 3 Consider the amount of the interest payments included in each of the payments of an amortized loan. Which of the following statements regarding the pattern of the interest payments is true? The portion of the payment going toward interest is smaller in...
19) Which of the following statements about teratogens is NOT true? Group of answer choices The...
19) Which of the following statements about teratogens is NOT true? Group of answer choices The time of exposure to a teratogen impacts the type and degree of damage to the fetus. Female fetuses are far more likely to be affected by teratogens than male fetuses. Teratogens come in a large variety of forms. The greater the dose of a teratogen, the greater the effect.
Which of the following statements is TRUE for any mortgage? a. The monthly payments will decline...
Which of the following statements is TRUE for any mortgage? a. The monthly payments will decline over time. b. When amortizing a mortgage, the 1st mortgage payment and 360th mortgage payment have the same interest amount with regards to amortizing the loan. c. A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment. d. The total dollar amount of principal being paid off each month gets...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT