What Is the Effective Rate of Interest on a CD

question 60

Multiple Choice

What is the effective rate of interest on a CD that has a nominal rate of 9.5 percent with interest compounded monthly?

• A)9.92%
• B)9.74%
• C)10.02%
• D)9.86%

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Definitions:

Investing Activities

One of the components of cash flow statements that shows the cash spent on and generated from various investment-related activities in a specific period.

Financing Cash Flows

Cash flows related to obtaining or repaying capital, such as issuing or buying back shares and borrowing or repaying loans.

Paying Cash Dividends

Paying Cash Dividends involves distributing a portion of a company's earnings to shareholders in cash, reflecting a return on investment.

GAAP

A group of standard accounting practices and principles broadly used for reporting financial information.