City Bank Offers a 7-Year CD with a Nominal Rate

question 27

Multiple Choice

City Bank offers a 7-year CD with a nominal rate of interest of 7.0%. If compounding occurs continuously, what is the effective annual rate?

• A) 7.25%
• B) 6.77%
• C) 7.32%
• D) 7.00%

Identify the normal balances for different types of accounts (assets, liabilities, equity, revenue, and expenses).

Comprehend the structure and purpose of a T-account.

Recognize how transactions affect account balances within the double-entry accounting system.

Analyze the impact of transactions on a company’s financial statements.

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Definitions:

Eliminate Intra-entity Transfer

The process of removing transactions between entities within a single organization from the consolidated financial statements to prevent double counting.

Intra-entity Transfer

Transactions involving assets, services, or funds between units or divisions within the same legal entity.

Consolidated Income Statement

A financial statement that presents the overall income of a corporation and its subsidiaries as a single entity.

Deferred

In finance, this term refers to transactions or events that are postponed to a future date.