which of the following statements are true? 1. there is an inverse relationship between interest rates and future vales 2. the effective annual interest rate (EAR) will be higher than the annual percentage rate (APR) for a loan that compounds interest annually 3. there is an inverse relationship between present value and interest rates 4. all else equal, the more frequent interest in compounded on a loan, the more interest you will have to pay

Which of the following statements is CORRECT? Question 2 options: a) The proportion of the payment that goes toward interest on a fully amortized loan increases over time. b) An investment that has a nomiral rate of 6% with semiannual payments will have an effective rate that is smaller than 6%. c) If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different. d) The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due. e) if a loan has a nominal annual rate of 7%, then the effective rate will never be less than 7%.

Assess the following statements: Simple interest calculations assume the interest earned is never reinvested.  The real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption.  Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding.  For any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows.  a. Three statements are incorrect. b. Two statements are incorrect. c. Only one statement is incorrect. d. All statements are correct.

the intereswt rate a company pays on 1 - year, 5-year loan depends on?

Write TRUE if the statement is true and FALSE if otherwise.   1. Compounding refers to the earning of interest on interest. 2. Discounting refers to the process of bringing the future back to the present. 3. The more frequently interest is compounded, the larger will be the final or terminal amount. 4. It takes longer than 8 years to retire a $24,000 loan at 8% if the annual payment is $3,000. 5. An annuity of $100 for 10 years is currently lessvaluable if interest rates are 10% instead of 12%. 6. If a person buys a stock for $10 and sells it after 10years for $20, the annual compound return is 10%. 7. Higher rates of interest are associated with greater present values. 8. If interest rates are 9 percent, an annuity of $100 for 10 years is to be preferred to $1,000 after 10 years. 9. If a bank pays 5 percent compounded semi-annually, the true rate of interest is less than 5 percent annually.

Calculating Real Rates of Return IfTreasury bills are currently paying 4.7 percent and the inflation rate is 1.9 percent, what is the approximate real rate of interest? The exact real rate?

Suppose the interest rate is 4.4%. a. Having $550 today is equivalent to having what amount in one year? b. Having $550 in one year is equivalent to having what amount today? c. Which would you prefer, $550 today or $550 in one year? Does your answer depend on when you need the money? Why or why not? a. Having $550 today is equivalent to having what amount in one year? It is equivalent to $. (Round to the nearest cent.)

1. What is the different between an ordinary annuity and an annuity due? Which occursmore in practice? Give a common example of both. 2. Using the example of a savings account, explain the difference between the effectiveannual rate and the annual percentage rate. 3. A mortgage instrument pays $1.5 million at the end of each of the next two years. Aninvestor has an alternative investment with the same amount of risk that will payinterest at 8% compounded semiannually. what the investor should pay for themortgage instrument?

2 Given a set of present value tables, an annual interest rate, the dollar amount of equal payments made, and the number of semiannual payments, what other information is necessary to calculate the present value of the series of payments?   A. The future value of the annuity. B. The timing of the payments (whether they are at the beginning or end of the period). C. The rate of inflation. D. No other information is required.

What is the maximum interest rate the borrower will pay during the 30-year term for this loan? If the interest rate is at its maximum, what would the MTA index have to be to reach the maximum interest rate?