1. Which of the following investment has the highest effective annual rate ( EAR)? a. An investment that pays 8 percent interest compounded daily

b. An investment that pays 8 percent interest compounded monthly

c. . An investment that pays 8 percent interest compounded semiannually

d. . An investment that pays 8 percent interest compounded annually

2. You want $20,000 in 5 years to take your spouse on a second honeymoon. Your investment account earns 7% compounded semiannually. How much money must you put in the investment account today. ( round to the nearest $1)

a. $15,985

b. $14,178

c. $ 12,367

d. $13,349

3. APR and EAR will be the same

a. If the interest rate is daily compounding

b. If the interest rate is monthly compounding

c. . If the interest rate is quarterly compounding

d. If the interest rate is annual compounding