| 1. |
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In an account earning simple interest, the interest from the first year is reinvested at the beginning of the second year. |
| 2. |
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An investment that earns compound interest is the same as one that earns simple interest at the effective yield. |
| 3. |
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In simple interest, the future value of an investment is always a linear function of the the number of years the investment is held. |
| 4. |
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If an investment earns compound interest, then its future value is not a linear function of the the number of years the investment is held. |
| 5. |
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If an investment pays interest at an annual rate of 5% per year, compounded twice a year, then the effective yield is larger than 5%. |
| 6. |
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If an investment pays interest at an annual rate of 5% per year, compounded once a year, then the effective yield is larger than 5%. |
| 7. |
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If an investment pays interest at an annual rate of 5% per year, compounded once a year, then the effective yield is smaller than 5%. |
| 8. |
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If, due to inflation, prices are rising by 1% every month, they will rise exactly 12% during the year. |
| 9. |
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If, due to inflation, prices are rising by 1% every month, they will rise by about 12.7% during the year. |
| 10. |
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An investment earning 20% interest compounded twice a year is better than one earning 19.7% interest compounded daily. |
| 11. |
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An investment earning 20% interest compounded twice a year is better than one earning 19% interest compounded daily. |
| 12. |
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If you deposit $200 each month into an interest-bearing account, and if your little brother withdraws $125 from the same account, the account is an increasing annuity. |
| 13. |
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If you invest $100 per month in an interest bearing account, then that account becomes a decreasing annuity the moment your investments stop. |
| 14. |
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On a mortgage or other long-term loan, the early payments go mostly to paying interest. |
| 15. |
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Shortening the period of a loan lowers the monthly payments. |
| 16. |
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Shortening the period of a loan lowers the total interest paid. |
| 17. |
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In a conventional mortgage, the lending institution is making regular payments into an increasing annuity. |
| 18. |
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In a conventional mortgage, the lending institution is making regular withdrawals from a decreasing annuity. |
| 19. |
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In a conventional mortgage, the borrower is making regular payments into an increasing annuity. |
| 20. |
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In a conventional mortgage, the borrower is making regular withdrawals from a decreasing annuity. |
