Find the Effective Annual Interest Rate of 7% Compounded Daily $r _ { \text {eff } } = 7.25 \%$

question 3

Multiple Choice

Find the effective annual interest rate of 7% compounded daily. Assume 365 days per year. Round your answer to the nearest 0.01%.

• A) \(r _ { \text {eff } } = 7.25 \%\)
• B) \(r _ { \text {eff } } = 25.55 \%\)
• C) \(r _ { \text {eff } } = 7.30 \%\)
• D) \(r _ { \text {eff } } = 7.35 \%\)
• E) \(r _ { \text {eff } } = 1.92 \%\)

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Definitions:

Maintenance Margin

The minimum amount of equity that must be maintained in a margin account after a purchase has been made, to keep the account open.

Initial Margin

The minimum amount of funds required to open a new position in a securities or futures contract, intended to cover some of the credit risk of market participants.

Primary Market

The financial market for new securities issues, where companies sell new stocks and bonds directly to investors.

Investment Bankers

Firms specializing in the sale of new securities to the public, typically by underwriting the issue.