Which of the following is false? I. A lower interest rate would increase the present value of an investment. II. With compound interest method, interest is earned every period only on the orginal starting amount. III. "PMT" in the FVA formula tells us the periodic mortage payments for a fixed-rate fully amortized loan. O A. I, II, and III B. C. OD. Ill only II and III only I only

Which of the following is false? I. A lower interest rate would increase the present value of an investment. II. With compound interest method, interest is earned every period only on the orginal starting amount. III. "PMT" in the FVA formula tells us the periodic mortage payments for a fixed-rate fully amortized loan. O A. I, II, and III B. C. OD. Ill only II and III only I only

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Toms UI IVesuTment to ychciut ed as a cost of borrowing to compensate the opportunity costs of the bank with I to the cash loaned to you. Moreover, the interest rate is usually expressed as nual percentage rate. activity ctions: On the space provided, write TRUE if the idea being expressed is correct and FALSE if otherwise. 1. In the most loan amortization schedules, amortization of discount or premium of the loan increases over time. 2. The process of obtaining future values is called discounting. 3. An annuity in which cash flows occur at the end of each period is called annuity. age
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%.
To account for a down payment, adjust the _____ of the loan by subtracting it from the loan amount. O present value (pv) future value (fv) rate O type
Assess the following statements: 1. Simple interest calculations assume the interest earned is never reinvested. II. 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. II. Earning a 5% interest rate with annual compounding is better than earning a 4.95% interest rate with semiannual compounding. IV. 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. All statements are correct. Two statements are incorrect. O Three statements are incorrect. Only one statement is incorrect.
pls refer to the image attached, 1. suppose that you have the capacity to pay, would you rather borrow a loan that is amortized monthly, or one that is amortized quarterly? 2. what is your considerations when availing a loan? (quantitative or qualitative considerations) Discuss.
In the PMT function, what is not true about the rate argument? Group of answer choices It assumes an annual interest rate. It can contain references to fields. It is optional. It reflects the interest charged on a loan.
6. Time Value of Money: Comparing Interest Rates Different compounding periods, are used for different types of investments. In order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominal interest rate (INOM) and the effective annual rate (EAR). The -Select- interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR). If the compounding periods for different securities is the same, then you -Select- use the APR for comparison. If the securities have different compounding periods, then the -Select- must be used for comparison. Here, M is the number of compounding periods per year and INOM/M is equal to the periodic rate (IPER). If a loan or investment uses -Select- the nominal interest rate is also its effective annual rate. However, if compounding occurs more than once a year, EAR is -Select- INOM.…
Which of the following refers to the ratio of the interest to the principal repayment on an annual unpaid loan? A. it increases as the loan gets older О в. it decreases as the loan gets older O c. it remains constant over the life of the loan O D. it changes according to the level of market interest rates during the life of the loan
1. Construct a partial amortization schedule showing the last 2 payments. PMT Setting N I/Y P/Y C/Y PV PMT FV Payment NumberPaymentInterest PaidPrincipal RepaidOutstanding Principal 2. Determine the total amount paid to settle the loan. Show work, not just the answer. 3. Determine the total principal repaid. 4. Determine the total amount of interest paid. Show work, not just the answer.
4.What is the effective interest method of amortization? a. It is an amortization method that provides for the recognition of an equal amount of amortization of premium or discount each period. b. It is an amortization method that provides for the recognition of an equal rate of amortization of premium or discount each period. c. It is computed as the effective rate (constant rate) multiplied by the face value of the note. d. It is the same as the straight line method of amortization.
Indicate whether the statement is true or false. 1. Given 10 and 30 year loans with the same interest rate, the 30 year loan results in a lower periodic payment. a. True b. False
4.-Among the following options are the main characteristics (purpose of the credit, term, interest collection and guarantees) of the Direct Loan. Choose the 4 correct answers. A) To finance the purchase of machinery B) Long term C) With real guarantees. D) With interest charged at maturity E) 30, 60, 90 days F) With interest collected in advance G) To finance working capital H) Without guarantees

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