Your Bank Account Pays a 5% Nominal Rate of Interest

question 18

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%.

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Definitions:

Item Response Theory (IRT)

A theory and method used in education and psychology to model the relationship between individuals' skills or traits and their performance on test items.

Empirical Method

A scientific approach that relies on observation and experiment rather than theory or pure logic.

Fundamental Personality Traits

Core traits believed to constitute the foundation of human personality, often related to the Big Five personality dimensions.

Rational Method

An approach based on reason and logic in decision-making or problem-solving, often involving systematic steps.