Dat Nguyen Is Depositing $17,500 in an Account Paying an Annual

question 75

Multiple Choice

Dat Nguyen is depositing $17,500 in an account paying an annual interest rate of 8.25 percent compounded monthly. What is the interest on interest after six years?

• A) $8,662.50
• B) $10,925.44
• C) $2,497.63
• D) $1,092.48

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Definitions:

Arithmetic Average Return

The sum of all returns in a series divided by the number of returns, used to calculate the average performance of an investment over time.

Complete Portfolio

A combination of a risk-free asset and one or more risky assets, structured to meet the investor's risk-return objectives.

Risk-Free Asset

An asset which is assumed to have no risk of financial loss and typically refers to government bonds or bills.

Risky Portfolio

A risky portfolio comprises investments that have a higher degree of risk, aiming for potentially higher rewards but with an increased possibility of losses.