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:

New England Indians

Indigenous peoples from the New England region of the United States with distinct cultural and historical backgrounds.

Christian God

The deity worshipped in Christianity, believed to be the creator of the universe and the source of all moral authority.

English Culture

The customs, traditions, arts, social norms, and values that are characteristic of the English people and society.

Puritans

A group of English Protestants in the 16th and 17th centuries who sought to "purify" the Church of England from its "Catholic" practices.