You Have Some Money on Deposit in a Bank Account

Multiple Choice

You have some money on deposit in a bank account which pays a simple (or quoted) rate of 8.0944 percent, but with interest compounded daily (using a 365-day year) .Your friend owns a security which calls for the payment of R10,000 after 27 months.The security is just as safe as your bank deposit, and your friend offers to sell it to you for R8,000.If you buy the security, by how much will the effective annual rate of return on your investment change?

A) 1.87%
B) 1.53%
C) 2.00%
D) 0.96%
E) 0.44%