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Memphic Memphic
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6 years ago
Which alternative offers you the highest effective rate of return?
A) Investment A
B) Investment B
C) Investment C
D) Investment D
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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#1
6 years ago
D
Explanation:  D) EAR (A) = (1 + APR/k)k - 1 = (1 + .0625/1)1 - 1 = .0625 or 6.250%
EAR (B) = (1 + APR/k)k - 1 = (1 + .0610/365)365 - 1 = .06289 or 6.289%
EAR (C) = (1 + APR/k)k - 1 = (1 + .06125/4)4 - 1 = .06267 or 6.267%
EAR (D) = (1 + APR/k)k - 1 = (1 + .0612/12)12 - 1 = .06295 or 6.300%
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