Which Is the Most Attractive of the Following Interest Rates

question 39

Multiple Choice

Which is the most attractive of the following interest rates offered on a savings account?

• A) 2.7% compounded annually
• B) 2.68% compounded semiannually
• C) 2.66% compounded quarterly
• D) 2.64% compounded monthly
• E) All of them offer the same effective rate.

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Definitions:

After-Tax Cost

The net cost of a financial transaction after factoring in the effects of taxes.

Straight-Line Method

A method of calculating depreciation of an asset, where the asset's cost is evenly spread over its useful life, resulting in equal annual depreciation expenses.

Salvage Value

The estimated residual value of an asset at the end of its useful life, often considered for depreciation calculations.

Lease Payments

Regular payments made by a lessee to an lessor for the use of an asset over a specified period.