If You Have an Account with a 21

question 132

Multiple Choice

If you have an account with a 21.5% annual percentage rate where interest is compounded quarterly, what is the effective annual rate of interest?

• A) 23.75%
• B) 23.3%
• C) 21.5%
• D) none of the above

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Definitions:

Time Value

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Money

A medium of exchange that facilitates the transfer of goods and services, traditionally in the form of coins and banknotes, but also digitally.

Payment Streams

Regularly scheduled payments, either incoming or outgoing, over a specified period.

Interest Rate

The percentage charged on a loan or paid on savings over a specific period, usually one year.