Question No 49:
The details of four short term investments are as follows:
Investment A pays interest of 1.7% every 3 months
Investment B pays interest of 3.4% every 6 months
Investment C pays interest of 5.4% every 9 months
Investment D pays interest of 7.0% every 12 months
The investment that gives the highest effective annual rate of interest, assuming that the interest is reinvested, is:
A. Investment A
B. Investment B
C. Investment C
D. Investment D
Answer:
Investment A = (1.017)4 = 6.975%
Investment B = (1.034)2 = 6.916%
Investment C = (1.054)12/9 = 7.264%
Investment D = 7%
Answer: C
No comments:
Post a Comment
Note: only a member of this blog may post a comment.