ABC Bank Offers a Return of 9% on a Savings

question 81

Multiple Choice

ABC Bank offers a return of 9% on a savings account for five years using simple interest while XYZ Bank offers a return of 9% for five years using compound interest.An investor should choose

• A)the simple interest option because both have the same basic interest rate.
• B)the compound interest option because it provides a higher overall return.
• C)the compound interest option only if interest is compounded monthly.
• D)the simple interest option only if interest is compounded monthly.
• E)the compound interest option because both have the same basic interest rate.

---

Definitions:

Organizational Expenses

Costs incurred during the formation of a company, such as legal fees, registration fees, and promotional expenses.

Intangible Assets

Non-physical assets possessed by a company, such as patents, trademarks, and goodwill, that have value and can produce future economic benefits.

Balance Sheet

A report that outlines the total assets, obligations, and equity of shareholders of a company at a given time.

Par Value

The face value of a bond or stock as specified by the issuing company, which has little relation to its market value.