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You are considering the purchase of a two-year certificate of deposit with the $10,000 you recently inherited. The CD will be held to maturity. First
You are considering the purchase of a two-year certificate of deposit with the $10,000 you recently inherited. The CD will be held to maturity. First Imperial Bank is currently paying 8.75 percent interest compounded monthly. Ace Bank pays 8.55 percent, compounded quarterly. Based on an analysis of the effective annual return earned on these two different Investments, you conclude that: First Imperial is preferred with an effective interest rate of 9 11 percent versus 8.83 percent for Ace Bank First Imperial is more attractive because it offers monthly compounding versus quarterly compounding for Ace Bank. First Imperial is preferred with an effective interest rate of 9.04 percent versus 8.89 percent for Ace Bank First Imperial provides the highest return of 8.75 percent versus only 8.55 percent for Ace Bank
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