A Financial Advisor Says She Has an Investment That Will

question 45

Multiple Choice

A financial advisor says she has an investment that will pay you $500 a month forever. It will cost you $25,000 today. What effective annual rate (EAR) will you earn on this investment?
Round your answer to the nearest tenth of a percent.

• A)21.2%
• B)20.0%
• C)26.8%
• D)24.0%

Understand the concept of covariance and its role in portfolio risk assessment.

Evaluate market potential impacts on investment outcomes and R&D decision-making.

Understand how to record transactions using general journal entries.

Identify and analyze accounting transactions and their impact on the accounting equation.

---

Definitions:

Dust Bowl

A period in the 1930s characterized by severe dust storms that damaged the ecology and agriculture of the US and Canadian prairies.

Okies

A term originally used to describe residents of Oklahoma during the Dust Bowl era, it now refers broadly to people who migrated from the central United States during economic hardships.

1930s

A decade marked by the Great Depression, affecting economies worldwide with severe economic downturns, high unemployment rates, and significant social and political impacts.

Stock Market Crash

A rapid and severe downturn in stock prices across a significant cross-section of a stock market, resulting in a significant loss of paper wealth.