// a. The annual payments would be larger if the interest rate were lower. b. Th
ID: 2665380 • Letter: #
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a. The annual payments would be larger if the interest rate were lower. b. The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower. c. If the loan were amortized over 10 years rather than 7 years, and if the interest rate were the same in either case, the first payment would include more dollars of interest under the 7-year amortization plan. d. The proportion of interest versus principal repayment would be the same for each of the 7 payments. e. The last payment would have a higher proportion of interest than the first payment. A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? a. The PV of the $1,000 lump sum has a smaller present value than the PV of a 3-year, $333.33 ordinary annuity. b. The present value of the $1,000 would be larger if interest were compounded monthly rather than semiannually. c. The present value would be greater if the lump sum were discounted back for more periods. d. The periodic interest rate is greater than 3%. e. The periodic rate is less than 3%.Explanation / Answer
A $50,000 loan is to be amortized over 7 years, with annual end-of-year payments. Which of these statements is CORRECT? b.The proportion of each payment that represents interest as opposed to repayment of principal would be lower if the interest rate were lower. A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today. The nominal interest rate is 6%, semiannual compounding. Which of the following statements is CORRECT? a. The PV of the $1,000 lump sum has a smaller present value than the PV of a 3-year, $333.33 ordinary annuity.
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