Computation of effective annual return

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Reference no: EM1310344

Computation of effective annual return and rate of return.

1) Assume you have a choice between two deposit accounts. Account X has an annual percentage rate of 12.25 percent but with interest compounded monthly. Account Y has an annual percentage rate of 12.20 percent with interest compounded continuously. Which account provides the highest effective annual return?

2) Ralph's Ratchets Corporation purchased ratchets rotator one year ago for $6,500. During the year it generated $4,000 in cash flow. If Ralph sells it, he could receive $6,100 for it. What is ratchets rotator's rate of return?

3) Asset A was purchased six months ago for $25,000 and has generated $1,500 cash flow during that period. What is the asset's rate of return if it can be sold for $26,750 today?

Reference no: EM1310344

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