You have $500 that you would like to invest. You have two choices: Savings account A which earns 8% compounded annually, or savings account B which earns 7.75% compounded semi-annually. Which would you choose and why?
A) A, because it has a higher effective annual rate.
B) A, because the future value in one year is lower.
C) B, because it has a higher effective annual rate.
D) B, because the future value in one year is lower.
E) B, because it has the higher quoted rate.
Correct Answer:
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