Question
In: Finance
1. (TRUE or FALSE?) Compound interest decreases as the number of years increases. 2. (TRUE or...
1. (TRUE or FALSE?) Compound interest decreases as the number of years increases.
2. (TRUE or FALSE?) The process of converting the initial amount into a future value is called discounting.
3. (TRUE or FALSE?) The future value is simply the current value of a future cash flow that has been discounted at the appropriate discount rate.
Solutions
Expert Solution
1. Ans- False. With increase in the number of years, the Compound interest will increase rather than decrease.
2.. Ans- False. The process of converting the initial amount into a future value is called Compounding rather than discounting.
Discounting is a process of converting Future Value into Initial amount.
3. Ans- False. The future value is simply the current value of a future cash flow that has been Compounded at the appropriate Interest rate.
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