CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

Which of the following investments will grow to the largest future value?

Investment | Stated Annual Interest Rate | Frequency
I | 8.40% | Monthly
II | 8.60% | Quarterly
III | 8.64% | Semi-annually
A. I
B. II
C. III
Explanation: Use the EAR (effective annual rate) to compare the investments:

I. (1 + .084/12)12 - 1 = 8.73%
II. (1 + .086/4)4 - 1 = 8.88%
III. (1 + .0864/2)2 - 1 = 8.83%

Investment II has the largest EAR.

User Contributed Comments 1

User Comment
Mels08 Also use the Calculator BAII Plus
2nd ICONV
NOM 8.4
C/Y 12
CPT EFF 8.73
Do the same with the rest
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