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Which of the following statements is FALSE?

A. The effective annual rate indicates the amount of interest that will be earned at the end of the year.
B. The annual percentage rate indicates the amount of simple interest earned in one year.
C. The annual percentage rate indicates the amount of interest including the effect of compounding.
D. Because interest rates may be quoted for different time intervals, it is often necessary to adjust the interest rate to a time period that matches that of our cash flows.

Respuesta :

Answer:

C. The annual percentage rate indicates the amount of interest including the effect of compounding.

Explanation:

Annual interest rate, indicates the simple interest that can be earned annually on the investment, until and unless it is clearly mentioned to be compounded with the time period defined it cannot be concluded that the interest is carrying the compound benefit.

Therefore, the above stated option C is a false statement.

Final Answer

C. The annual percentage rate indicates the amount of interest including the effect of compounding.

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