An investor is considering two savings accounts for a one$-$year investment. The first account offers an

interest rate of $2\mathrm{.}4\%$ with interest compounded quarterly, while the second account offers an interest rate

of $2\mathrm{.}5\%$ with interest compounded annually. To make an informed decision, the investor wishes to

compare the effective annual rates $($EAR$)$ of both accounts. Calculate the EAR for each account and

select the correct option that accurately represents the higher EAR and the difference between the two

EARs.

A$.$ The first account has a higher EAR by $0\mathrm{.}08\%.$

B$.$ The second account has a higher EAR by $0\mathrm{.}05\%.$

C$.$ The first account has a higher EAR by $0\mathrm{.}05\%.$

D$.$ The second account has a higher EAR by $0\mathrm{.}08\%.$

E$.$ Both accounts have the same EAR.

$2\mathrm{.}4\%-$ quarterly

$2\mathrm{.}5\%-$ annually

How to find Ear?

Lonnie and Les visited your office today. They are both in their early $30$ s and have two children with

one on the way. During your meeting they provide you with the following financial information:

Gross Income per Year $-$ $$150,000$

Housing Costs per Year $($P & I and T & I$)-$ $$24,000$

Other Debt Payments per Year $-$$$50,000$

Total Assets $-$ $$300,000$

Total Debt $-$$$200,000$

Which of the following is true?

a$.$ The housing ratio $1($basic$)$ is within the normal range.

b$.$ The housing ratio $2($broad$)$ is within the normal range.

c$.$ The debt$-$to$-$total assets ratio is $25\%.$

Maria and Alex currently have $$6,790$ saved for their son's college education. If their goal is to

accumulate $$50,000$ over the next $10$ years for this goal and they can earn $5\mathrm{.}5\%$ annually, how

much more do they need to invest at the end of each month for the next $10$ years?