For someone who has $100,000 to save for 20 years, would a 4% Certificate of Deposit that compounds annually be a better deal than a 3.94% Certificate of Deposit that compounds quarterly? Why?
What will be an ideal response?
Answer: With the 4% annual compounding, your $100,000 would compound into $219,112.31. There would be 20 compounding periods at 4% per year and the interest would be calculated at the end of every year. Your $4,000 in interest from year one would not earn any interest until the end of year two ($160). With the quarterly compounding your interest would start earning interest itself starting with the second quarter of year one. There would be a total of 80 compounding periods (4 quarters per year times 20 years) and this would mean that even with the lower interest rate, your money would grow to $219,053.19 for a slight difference of $59.12!
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Which of the following is not an element of management's assessment process for the effectiveness of internal control?
A. Determining the locations and business units to include in the evaluation. B. Identifying financial reporting risks and related controls. C. Evaluating evidence about the operating effectiveness of ICFR. D. Obtaining the auditor's assessment of the internal control effectiveness.
When calculating a partial year's depreciation, the length of time an asset has been owned usually is rounded to the nearest month. This rounding practice is justified by the principle or rule of
a. matching. b. materiality. c. conservatism. d. full disclosure.
How has the public perception of whistleblowers changed over time?
a. from relatively harmless tattletales to individuals who can do real damage to a company b. from disgruntled employees toward an image as misguided social warriors c. from disgruntled employees toward an image as people providing a public service d. from public servants to greedy opportunists (as cash settlements to whistleblowers has risen)
On June 1, $400,000 of bonds were purchased as a long-term investment at 101.5 and $500 was paid as the brokerage commission. If the bonds bear interest at 12%, which is paid semiannually on January 1 and July 1, what is the total cost to be debited to the investment account?
A) $400,000 B) $406,500 C) $405,500 D) $402,000