What Is the Effective Annual Rate of Interest on a Deposit

question 28

Multiple Choice

What is the effective annual rate of interest on a deposit that pays interest of 10% continuously compounded?

• A) 10.000%
• B) 10.517%
• C) 1.105%
• D) 9.531%

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Definitions:

Disposable Income

The amount of capital available for household expenditures and savings once income taxes have been removed.

Inventory

The goods and materials that a business holds for the ultimate goal of resale or repair.

Depreciation

The gradual decrease in the economic value of the capital stock of a firm, nation, or other entity, either through physical wear and tear or obsolescence.

Net Investment

The total amount of investment in new capital assets minus the depreciation on existing assets, indicating growth in an economy's productive capacity.