1. The effective annual rate (EAR) is:

a. The annual rate of interest actually paid or earned.

b. The annual rate to be used in continuous compounding situations.

c. The stated rate of interest.

d. The annual rate of interest in affect during the current year.

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2. Net working capital:

a. is a measure of a firm's overall liquidity

b. is defined as total assets minus current liabilities

c. reflects decreasing firm solvency as it increases

d. is defined as current assets minus total liabilities