Multiple Compounding Periods (FV): Your Mother Is Trying to Choose

question 84

Multiple Choice

Multiple compounding periods (FV) : Your mother is trying to choose one of the following bank term deposits to invest $10,000. Which one will have the highest future value if she plans to invest for three years?

• A) 3.5% compounded daily
• B) 3.25% compounded monthly
• C) 3.4% compounded quarterly
• D) 3.75% compounded annually.

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Definitions:

Two-Tailed Hypothesis

A form of statistical hypothesis testing where the alternative hypothesis specifies that the parameter of interest differs from the null hypothesis.

Population Mean

The average value of all the members of a set or population, denoting the central tendency.

Null Hypothesis

An assumption made for a statistical test that there is no significant difference or effect, to be tested against the alternative hypothesis.

Equality Sign

A symbol used in mathematics to indicate that two expressions on either side of the sign are equal in value.