Five Friends All Open Investment Accounts Today

question 42

Multiple Choice

Five friends all open investment accounts today. Which one will withdraw the largest amount of money from their account assuming that they each withdraw their funds at the end of their initial
Investment period?

• A) John, who invests $1,000 for eight years at 6% simple interest.
• B) Terry, who invests $1,000 for four years at 9% with interest compounded annually.
• C) Alicia, who invests $800 for ten years at 11% with interest compounded annually.
• D) Kristi, who invests $1,200 for six years at 8% simple interest.
• E) Roger, who invests $900 for nine years at 9% with interest compounded annually.

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Definitions:

Ability to Meet Obligations

A financial assessment of whether a company or individual has the resources necessary to pay off their debts as they come due.

Return on Assets

A profitability ratio that measures how efficiently a company is using its assets to generate earnings.

Direct Method

In cash flow reporting, a method that shows the specific sources and uses of cash, categorizing cash flows into operating, investing, and financing activities.

Net Cash Provided

The amount of cash generated by a company’s operations after accounting for all cash inflows and outflows.