If You Were Evaluating a Investment Over a 10-Year Period

question 23

Multiple Choice

If you were evaluating a investment over a 10-year period that paid 8% compounded semiannually:

• A) you would not need to make any special adjustments because the semiannual compounding will not impact the investment's future value.
• B) you would need to divide the number of years by two and multiply the interest rate by two to properly adjust for the semiannual compounding.
• C) you would need to divide the interest rate by two and multiply the number of years by two to properly adjust for the semiannual compounding.
• D) None of the above

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Definitions:

Reimburse

To pay back or compensate someone for expenses they have incurred.

Recourse

A legal means to seek enforcement of or redress for an obligation, right, or injury.

Stop-payment Order

An instruction to a bank not to process or honor a check or payment previously issued by the account holder.

Drawee Bank

The bank upon which a check is drawn and is responsible for paying the check amount to the payee.