Which of the following statement is false?
(a)-the real interest rate is the increment to purchasing power that the lender earns in order to induce him or her to forego current consumption. "if you earn 0.5% a month in your bank account, this would be the same as earning a 6% annual interest rate with annual compounding. " simple interest calculations assume that interest earned is never reinvested. "
(b)-an investor earned a 5% nominal rate of return over the year. however, over the year, prices increased by 2%. the investor's real rate of return was less than his nominal rate of return. " for any positive interest rate the present value of a given annuity will be less than the sum of the cash flows and the future value of the same annuity will be greater than the sum of the cash flows.