Question
Which of the following statements is true? If you invest money for 10 years at 8% interest, compounded quarterly, you are effectively investing money for
Which of the following statements is true?
If you invest money for 10 years at 8% interest, compounded quarterly, you are effectively investing money for 40 three-month periods, during which you receive 2% interest each period.
As the interest rate decreases, the present value of future cash flows increases.
If the interest rate is greater than 0%, a dollar today is worth more than a dollar tomorrow.
As the number of compounding periods per year decreases (e.g., from monthly compounding to semi-annual compounding), the present value of future cash flows increases.
The rate of return on any perpetuity is equal to its annual cash flow divided by its present value.
The present value of a future sum of money decreases as the number of years before the payment is received increases.
In the amortization of a mortgage loan with equal payments, the fraction of each payment devoted to interest steadily decreases over time and the fraction devoted to reducing the loan balance increases with additional each payment made.
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