If You Want an Effective Rate of 6 Percent, What

question 57

Multiple Choice

If you want an effective rate of 6 percent, what is an acceptable quoted rate if interest is compounded quarterly?

• A) 5.50
• B) 5.65
• C) 5.87
• D) 6.12

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Definitions:

LIFO Reserve

The difference between the cost of inventory calculated under the Last-In, First-Out (LIFO) method and its cost calculated under the First-In, First-Out (FIFO) method.

Historical Cost

The original monetary value of an asset or investment at the time of its purchase, disregarding inflation over time.

Accounting Principle

Guidelines and standards intended to bring consistency and integrity to the financial reporting process.

Cost Or Market

An inventory valuation method that requires inventory to be recorded at the lower of its historical cost or its current market value.