Which of the Following Statements Is Correct, Assuming Positive Interest

question 80

Multiple Choice

Which of the following statements is correct, assuming positive interest rates and holding other things constant?

• A) Banks A and B offer the same annual rate of interest, but A pays interest quarterly and B pays semiannually. A deposit in Bank B will have a higher value in five years.
• B) Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays monthly. A deposit in Bank B will have a higher value in five years.
• C) Banks A and B offer the same nominal annual rate of interest, but A pays interest daily and B pays semiannually. A deposit in Bank B will have a higher value in five years.
• D) Banks A and B offer the same nominal annual rate of interest, but A pays interest weekly and B pays quarterly. A deposit in Bank B will have a higher value in five years.

---

Definitions:

Interim Statements

Financial reports covering a period of less than a full fiscal year, typically quarterly, intended to provide an update on an organization's financial position.

Financial Position

A summary of the resources, obligations, and worth of an entity at a specific point in time, usually reflected in a balance sheet.

Year-End Financial Statements

Reports prepared at the end of an accounting period, summarizing the financial status and operating results of a business.

Management

involves the activities of setting the strategy of an organization and coordinating the efforts of its employees or volunteers to achieve its objectives.