which of the following investments paid the highest rate of return?
(a) a corporate bond that paid $72 per year in interest and that cost $600 to purchase
(b) a money market fund that paid 8 percent interest
(c) a corporate stock that cost $40 to buy and that paid dividends of $2 per share
(d) a 9.5 percent certificate of deposit
My answer is B. Am I correct?
No.
Are you guessing? Or did you figure out the rate for each choice?
To determine which investment has the highest rate of return, we need to calculate the return on investment (ROI) for each option.
(a) The corporate bond pays $72 per year in interest and costs $600 to purchase. To calculate the ROI, divide the annual interest by the cost of the bond: $72 / $600 = 0.12, or 12%.
(b) The money market fund pays 8% interest. This means that for every dollar invested, you earn 8 cents. So the ROI is 8%.
(c) The corporate stock costs $40 to buy and pays dividends of $2 per share. To calculate the ROI, divide the annual dividends by the cost of the stock: $2 / $40 = 0.05, or 5%.
(d) The certificate of deposit pays 9.5% interest. This means that for every dollar invested, you earn 9.5 cents. So the ROI is 9.5%.
Comparing the ROI for each option, we find:
(a) 12%
(b) 8%
(c) 5%
(d) 9.5%
Based on these calculations, the option with the highest rate of return is option (a), the corporate bond, which has a return of 12%. Therefore, B is not the correct answer. The highest rate of return is offered by the corporate bond, option (a).