Which of the Following Bank Accounts Has the Highest Effective

question 27

Multiple Choice

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

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

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Definitions:

Case Study

A research method involving an up-close, in-depth, and detailed examination of a subject of study (the case), as well as its related contextual conditions.

Experimental Study

A research methodology involving the manipulation of variables to determine their effect on a particular outcome or to test a hypothesis.

Masked Design

A research design in which participants do not know which treatment group they are in to prevent bias; also known as a blinded design.

Placebo

An inert or non-therapeutic substance given to a control group in clinical trials to assess the psychological impact of receiving a treatment.