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%.

---

Definitions:

Depth Cue

A signal in our environment, either binocular or monocular, that provides information about distance or depth.

Apparent Narrowing

The perceived reduction in size or scope of an object or concept, often as a result of specific conditions or perspectives.

Principle Of Closure

A psychological tendency to perceive a complete image even when the sensory information is incomplete, based on our brain's preference for simplicity and continuity.

Neon Sign

A lighting display made of glass tubes that have been filled with a gas and bent into the shape of letters or decorative designs, which emit light when electrified.