Which of the Following Bank Accounts Has the Highest Effective

question 52

Multiple Choice

Which of the following bank accounts has the highest effective annual return?

• A) An account that pays 8% nominal interest with monthly compounding.
• B) An account that pays 8% nominal interest with annual compounding.
• C) An account that pays 7% nominal interest with daily (365-day)compounding.
• D) An account that pays 7% nominal interest with monthly compounding.
• E) An account that pays 8% nominal interest with daily (365-day)compounding.

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Definitions:

Merchandising

Merchandising involves purchasing, displaying, and selling products to consumers, with strategies that aim to boost sales and profitability.

Service Enterprises

Businesses that provide intangible products or services to customers rather than tangible goods.

Unadjusted Balance

The initial balance of an account before any adjustments or corrections are made for accounting purposes.

Inventory

includes goods and materials a business holds for the purpose of resale or as part of its production process.