Which of the following statements is false?

1. Because interest rates may be quoted for different time intervals, it is often necessary to adjust the interest rate to a time period that matches that of our cash flows.
2. The annual percentage rate indicates the amount of interest including the effect of compounding.
3. The annual percentage rate indicates the amount of simple interest earned in one year.
4. The effective annual rate indicates the amount of interest that will be earned at the end of one year.