Which of the following statements is FALSE?
A)Quarterly compounding has a higher annual percentage yield than monthly compounding.
B)On monthly compounding loans,the annual percentage yield will be less than the nominal or quoted rate of interest.
C)Compounding essentially means earning interest on interest on an initial balance.
D)Perpetuities pay an equal payment forever.

Question

Quizplus · Accepted Answer

The statement that quarterly compounding has a higher annual percentage yield than monthly compounding is false. In fact, the more frequently interest is compounded, the higher the annual percentage yield will be. Therefore, monthly compounding will have a higher annual percentage yield than quarterly compounding.

Which of the Following Statements Is FALSE