What Is the Effective Annual Return (EAR) for an Investment

question 78

Multiple Choice

What is the effective annual return (EAR) for an investment that pays 10 percent compounded annually?

• A)equal to 10 percent
• B)greater than 10 percent
• C)less than 10 percent
• D)This question cannot be answered without knowing the dollar amount of the investment.
• E)None of the above is correct.

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Definitions:

Monopolistic

Pertaining to a market structure where there is only one producer or seller for a product or service, limiting competition.

Marginal Revenue

The extra income a company earns by selling an additional unit of a product or service.

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service; it varies depending on the level of production.

Average Variable Cost

The total variable costs divided by the quantity of output produced, representing the average cost of producing each unit excluding fixed costs.