Asked by
Sofiane Filouane
on Nov 08, 2024
Verified
Which of the following is NOT a true statement?
A) Present values and discount rates move in the opposite directions from one another.
B) On monthly compounded loans, the EAR will exceed the APR.
C) Compounding essentially means earning interest on interest.
D) Future values increase with increases in interest rates.
E) All else the same, the longer the term of a loan the lower will be the total interest you pay on it.
Discount Rates
The interest rate used to discount future cash flows to their present values in order to evaluate investments or projects.
EAR
Effective Annual Rate, which is the interest rate on a loan or financial product restated from the nominal interest rate as an annual rate compounded annually.
APR
The annual interest rate applied to borrowing or generated from an investment.
- Calculate and interpret the effect of changing interest rates, payment frequencies, and compounding methods on investments and loans.
Verified Answer
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Learning Objectives
- Calculate and interpret the effect of changing interest rates, payment frequencies, and compounding methods on investments and loans.