Your grandmother gave you an inheritance of $65,000, and you have done some shopping around for the best interest rates over the next year and is about to decide on which would offer you the best return.

a. Which investment offers you the highest EAR?

Stated Rate Compounding

7.10% Annual

M

6.90% Semiannual

6.85% Monthly

b. Now assume that you wish to invest your money for only six months and the annual compounded rate of 7.10 percent is not available. Which of the remaining investments would you choose?