Multiple choice

Directions: State whether the following statement is True Or False.

With infinitely increasing time periods and interest rates, annuity discount factor increases proportionately.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As interest rates increase, the discount factor decreases. As time periods increase, the annuity discount factor approaches a limit (1/r), it does not increase proportionately.

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