If Interest Is at 8% and It Is Compounded Continuously

question 25

Multiple Choice

If interest is at 8% and it is compounded continuously, what is the effective interest rate?

• A) 7.25%
• B) 5.14%
• C) 8.33%
• D) 9.76%

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Definitions:

Fairness

A person’s opinion as to whether a price, wage, or allocation is considered morally or ethically acceptable.

Systematic Errors

Suboptimal choices that (1) are not rational because they do not maximize a person’s chances of achieving his or her goals and (2) occur routinely, repeatedly, and predictably.

Self-Interested

Acting in a way that is most beneficial to oneself, often used in the context of economic behavior assuming individuals act to maximize their own welfare.

Willpower

The ability to resist short-term temptations in order to meet long-term goals.