- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 6. The Time Value of Money
- Subject 3. The Future Value and Present Value of a Single Cash Flow
CFA Practice Question
You have $500 that you would like to invest. You have two choices: Savings Account A, which earns 8% compounded annually, or Savings Account B, which earns 7.75% compounded semi-annually. Which would you choose and why?
A. You would choose A because it has a higher effective annual rate.
B. You would choose B because it has a higher effective annual rate.
C. You would choose B because it has the higher quoted rate.
User Contributed Comments 3
| User | Comment |
|---|---|
| azramirza | A=540 b=539.5 |
| poomie83 | 500 x (1+(.0775/2))^2 = 539.5 |
| izzarivera | To compute the EAR using BA II Plus 2nd 2, Nom=I enter,down arrow twice C/Y = N |