Which of the following statements is most correct?
A)There is an inverse relation between the present value interest factor of an annuity and the future value interest factor of an annuity,i.e. ,one is the reciprocal of the other.
B)The future value of an ordinary annuity can be determined as the product of the annual payment and the appropriate future value interest factor for an ordinary annuity.
C)If a bank uses daily compounding for a savings account,the nominal rate will be greater than the effective annual rate.
D)Each of the above statements is equally true.

Question

Quizplus · Accepted Answer

Option B is the most correct statement as it accurately represents the formula for calculating the future value of an ordinary annuity. Option A is not true as the present value interest factor of an annuity and the future value interest factor of an annuity are not reciprocal of each other. Option C is also incorrect as the effective annual rate takes into account compounding and is always greater than the nominal rate.

Which of the Following Statements Is Most Correct