Two Certificates of Deposit (CDs)pay Interest at Rates That Differ

question 57

Multiple Choice

Two certificates of deposit (CDs) pay interest at rates that differ by 4%. Money invested for 1 year in the first CD earns $90 interest. The same principal invested in the second CD earns $150. Find the two rates of interest.

• A)6%, 7%
• B)5%, 10%
• C)6%, 10%
• D)4%, 10%
• E)6%, 6%

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Definitions:

Acid-Test Ratio

A financial metric that measures a company's ability to cover its current liabilities with its most liquid assets.

Liquidity Problems

Financial challenges arising from a company's inability to convert assets to cash quickly without significant loss in value, possibly hindering its capacity to meet its short-term obligations.

Purchase Discounts

Reductions in the price of goods purchased, often provided by suppliers as an incentive for early payment.

Trade Discounts

A reduction in the listed price of goods or services offered by sellers to buyers, often based on volume purchased or to maintain long-term business relationships.