Which of the Following Bank Accounts Has the Lowest Effective

question 31

Multiple Choice

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

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

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Definitions:

Revenue Recognition Standards

Guidelines that dictate how and when revenue should be recorded and recognized on the financial statements to ensure consistency and comparability across different businesses.

Sales Discounts

Reductions in the price of goods or services offered to customers to prompt early payment or bulk purchases.

Sales Returns

Goods returned by the buyer to the seller for a refund or credit, often due to issues like defects or dissatisfaction.

Adjusting Entries

Journal entries made in accounting at the end of a reporting period to allocate income and expenditures to the period in which they actually occurred.