When would the calculation of the effective annual interest rate be most useful?
ID: 2649231 • Letter: W
Question
When would the calculation of the effective annual interest rate be most useful?
When comparing two investments that compound differently within a year
When comparing two investments that have different inherent risk
When comparing two investments that end at different points in time
When comparing two investments with different par values
When comparing two investments with different annuity amounts
4 points
QUESTION 23
In the story of New England Wire and Cable, the company was in an unusual situation of being worth more dead than alive. What economic principle was violated when Larry Garfield tried to get control of the firm, break it up, sell the assets, and make a profit?
The law of one price
Externalities
Non-positive marginal utility of wealth
Diminishing marginal return
Diminishing marginal utility of wealth
Suppose that Firm ABC has a bond trading with 8 years remaining till maturity and with a coupon rate of 5%. The bond will return its face value of $1,000 at maturity. Suppose that the bond
a.When comparing two investments that compound differently within a year
b.When comparing two investments that have different inherent risk
c.When comparing two investments that end at different points in time
d.When comparing two investments with different par values
e.When comparing two investments with different annuity amounts
Explanation / Answer
Answer: When would the calculation of the effective annual interest rate be most useful.
a. When comparing two investments that compound differently within a year.(It is used to compare the annual interest between loans with different compounding terms (daily, monthly, annually, or other).
Answer:In the story of New England Wire and Cable, the company was in an unusual situation of being worth more dead than alive. What economic principle was violated when Larry Garfield tried to get control of the firm, break it up, sell the assets, and make a profit.
a.law of one price
Answer: Suppose that Firm ABC has a bond trading with 8 years remaining till maturity and with a coupon rate of 5%. The bond will return its face value of $1,000 at maturity. Suppose that the bond
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.