1. Calculate the EAR for the following stated interest rates and determine which proposed rate offers the most attractive return.
a. 12% compounded monthly
b. 12.5% compounded quarterly
c. 13% compounded semianually
d. 13.25% compounded annually
2. Which of these events reduces cash holdings?
A) The firm sells a parcel of land at a loss.
B) The firm sells a parcel of land at a profit.
C) The firm changes its terms of sale and gives customers less time to pay for their purchases.
D) The firm pays more promptly for its raw materials.