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Question
Which of the following statements is correct?
a. Cash flow time lines are helpful graphical displays for situations involving simple annual interest but are not useful when time periods are more frequent than annual.
b. The future value of an annuity due is equal to the future value of an otherwise identical regular annuity with interest compounded on each payment for one additional period.
c. There is no precise method of calculating either present values or future values when fractional time periods are involved. We must instead use rough approximations.
d. The terminal value of a stream of uneven cash flows is found by simply summing up all the cash flows.
e. The annual percentage rate (APR) cannot be equivalent to the effective annual rate (EAR).
Answer
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