What Is the Effective Annual Rate of 10 Percent Compounded

question 13

Multiple Choice

What is the effective annual rate of 10 percent compounded semiannually?

• A)10.21 percent
• B)10.25 percent
• C)10.35 percent
• D)10.38 percent
• E)10.42 percent

---

Definitions:

Net Income

Net income of the company, which is what remains after deducting taxes, expenses, and other costs from its total revenue.

Period

In finance and business, a period refers to a specific duration of time considered for accounting, reporting, or evaluation purposes.

Accounts

A record within an accounting system that keeps track of financial transactions of a specific type, such as assets, liabilities, revenue, expenses, and equity.

Closing Entries

Adjustments made at the end of an accounting period to transfer balances from temporary to permanent accounts to prepare the books for the next period.