Which of the Following Bank Accounts Has the Lowest Effective

question 157

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.

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Definitions:

Unusual Items

Refers to uncommon or rare transactions that are not expected to occur frequently within the normal course of business.

Accounting Principles

Fundamental guidelines or rules that form the basis for accounting practices, such as relevance, reliability, comparability, and consistency.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets.

Percentage Increase

The proportional growth of a quantity over a specific period, calculated as the difference between the final and initial values divided by the initial value, multiplied by 100.