Your Bank Account Pays an 8% Nominal Rate of Interest

question 32

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%.

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Definitions:

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Goods or services that are currently available on the market, distinguished from newly developed or conceptual offerings.

Long Period

An extended duration of time, which can span years or even decades, often used in the context of investments or planning.

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An individual who develops new ideas or inventions independently, often without the support of an organization.

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