Which of the Following Investments Has the Highest Effective Annual

question 21

Multiple Choice

Which of the following investments has the highest effective annual return (EAR) ? (Assume that all CDs are of equal risk.)

• A) a bank CD that pays 7.00 percent interest compounded daily
• B) a bank CD that pays 7.10 percent compounded monthly
• C) a bank CD that pays 7.30 percent annually
• D) a bank CD that pays 7.25 percent compounded semiannually

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Definitions:

Succession Planning

A strategic process for identifying and developing new leaders who can replace old leaders when they leave, retire, or die, ensuring the organization's continuity.

Significant

Something that is important, noteworthy, or has a considerable impact or effect.

Potential Successor

An individual or entity considered likely to take over a role, position, or responsibility in the future.

Exit Strategy

A plan developed by a business or individual to sell ownership in the company, cease operations, or otherwise dispose of its operations and assets.