A Recent Advertisement in the Financial Section of a Magazine

question 109

Multiple Choice

A recent advertisement in the financial section of a magazine carried the following claim: "Invest your money with us at 14 percent,compounded annually,and we guarantee to double your money sooner than you imagine." Ignoring taxes,how long would it take to double your money at a simple rate of 14 percent,compounded annually?

• A) Approximately 3.5 years
• B) Approximately 5 years
• C) Exactly 7 years
• D) Approximately 10 years
• E) Exactly 14 years

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Definitions:

Economies of Scale

Cost advantages that entities experience as their operational size or volume increases, leading to reduced costs per unit of output.

Remuneration

The compensation a person receives in return for performing work or services, including wages, salaries, and benefits.

Non-controlling Interest

Non-controlling interest is an ownership interest in a business entity by shareholders that are not the parent company or controlling shareholders, reflecting their share of the equity in a subsidiary.

Subsidiary

A business that is under the control of another business, referred to as the parent company, by holding a majority of its voting shares.