Your Bank Account Pays an 8% Nominal Rate of Interest

question 145

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 2% and the effective rate of interest is 4%.
• B) The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.
• C) The periodic rate of interest is 4% and the effective rate of interest is less than 8%.
• D) The periodic rate of interest is 2% and the effective rate of interest is greater than 8%.
• E) The periodic rate of interest is 8% and the effective rate of interest is also 8%.

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