Multiple Choice
Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
A) the periodic rate of interest is 5% and the effective rate of interest is also 5%.
B) the periodic rate of interest is 1.25% and the effective rate of interest is 2.5%.
C) the periodic rate of interest is 5% and the effective rate of interest is greater than 5%.
D) the periodic rate of interest is 1.25% and the effective rate of interest is greater than 5%.
E) the periodic rate of interest is 2.5% and the effective rate of interest is 5%.
Correct Answer:
Verified
Correct Answer:
Verified
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