Which of the Following Bank Accounts Has the Lowest Effective

question 70

Multiple Choice

Which of the following bank accounts has the lowest 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.

---

Definitions:

Complying

The act of following, obeying, or conforming to a set rule, standard, or demand.

Court Order

A directive issued by a court or a judge requiring a person or entity to do or refrain from doing something.

Accountant-Client Privilege

A legal principle that protects the confidentiality of conversations and documents exchanged between a client and their accountant.

Federal Court

The system of courts at the national level in a country, which deals with legal matters that are under the authority of the federal government.