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Which one of the following investments provides the lowest effective annual rate of return (i., which of the following investments is the WORST (i.
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1.Which one of the following investments provides the lowest effective annual rate of return (i.e., which of the following investments is the WORST (i.e., the smallest EAR), assuming an investor wants to avoid earning the lowest return over an investing horizon of 10 years)?
a. An investment which has a 3.0 percent nominal rate with annual compounding.
b. An investment which has a 2.98 percent nominal rate with semi-annual compounding
. c. An investment which has a 2.965 percent nominal rate with quarterly compounding.
2.For a given nominal interest rate greater than 0%, if the number of compounding periods per year increases (for example, from quarterly to daily), the future value of $1000 to be received exactly 10 years from today will:
a. increase.
b. decrease.
c. remain unchanged.
d. either increase or decrease, depending on the nominal interest rate
d. An investment which has a 2.9575 percent nominal rate with monthly compounding. e. An investment which has a 2.955 percent nominal rate and daily (365) compounding.
