Previous Page Next Page Page 4 of 30 Question 4 (3.3 points) Which of the following statements is most correct? The first payment under a 3-year, annual payment, amortized loan for $1,000 will include a smaller percentage (or fraction) of interest if the interest rate is 5 percent than if it is 10 percent. If you are lending money, then, based on effective interest rates, you should prefer to lend at a 10 percent nominal, or quoted, rate but with semiannual payments, rather than at a 10.1 percent nominal rate with annual payments. However, as a borrower you should prefer the annual payment loan. The value of a perpetuity (say for $100 per year) will approach infinity as the interest rate used to evaluate the perpetuity approaches zero. Statements a, b, and c are all true. Statements b and c are true. Page 4 of 30 Next Pige Previous Page O of 30 questions saved Submit Quiz Question 5 (3.3 points) Which of the following will increase the present value of a lump sum (for example, the PV of $500 to be received N years from today). (Check all of the answer choices that are correct. This is an all or nothing question. Thus, if a and b are both correct and you do not put both of these or you include one of the other choices, you will receive 0 points). An increase in the lump sum amount. An decrease in the number of compounding periods per year (for example, the compounding changes from four times per year to one time per year). A decrease in N An increase in the interest rate A decrease in the lump sum amount. A decrease in the interest rate An increase in N An increase in the number of compounding periods per year (for example, the compounding changes from one time per year to 12 times per year). Previous Page Next Page Page S of 30