Multiple Choice
Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
A) the periodic rate of interest is 8% and the effective rate of interest is also 8%.
B) the periodic rate of interest is 2% and the effective rate of interest is 4%.
C) the periodic rate of interest is 8% and the effective rate of interest is greater than 8%.
D) the periodic rate of interest is 4% and the effective rate of interest is less than 8%.
E) the periodic rate of interest is 2% and the effective rate of interest is greater than 8%.
Correct Answer:
Verified
Correct Answer:
Verified
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