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3) Interest payments on the mortgage will increase steadily over time,
but the total amount of each payment will remain constant.
4)
The proportion of the monthly payment that goes towards
repayment of principal will be lower 10 years from now than it will be
the first year.
5)
The outstanding balance declines at a faster rate in the later years
of the loan’s life
12. Which of the following bank accounts has the highest effective
annual return?
1) An account that pays 8% nominal interest with monthly
compounding
2) An account that pays 8% nominal interest with annual
compounding.
3) An account that pays 7% nominal interest with daily (365-day)
compounding
4) An account that pays 7% nominal interest with monthly
compounding
5) An account that pays 8% nominal interest with daily (365-day)
compounding
13. 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?
1)
The periodic interest rate is greater than 3%.