Which of the Following Investments Has the Highest Effective Annual

question 144

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.

---

Definitions:

Equipment Purchase

The acquisition of physical assets such as machinery or office equipment that a business uses in its operating activities.

Cash

Money in the form of physical currency or balances held in bank accounts, considered the most liquid form of assets.

Poker Company

A business entity that provides platforms or environments for playing poker, either in physical locations or online.

Cash Collected

Refers to the actual inflow of cash received by a company from its various activities, such as sales, services, or loans.