PWC Recently Proposed to BMO to Change the Method of Compounding

question 62

Multiple Choice

PWC recently proposed to BMO to change the method of compounding interest on line of credit accounts to monthly compounding, as part of the marketing campaign. If the current rate is 2.5% compounded quarterly, what nominal rate should the PWC suggest to BMO executives to maintain the same effective rate of interest?

• A) 0.208%
• B) 2.495%
• C) 3.773%
• D) 2.5%
• E) 2.75%

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Definitions:

Time

A dimension in which events can occur in sequence from the past through the present to the future, also a critical element in economic models affecting production, consumption, and investments.

Economics

The social science that studies how individuals, governments, and nations make choices on allocating resources to satisfy their wants and needs.

Sociology

The study of social behavior, society, patterns of social relationships, social interaction, and culture that surrounds everyday life.

Time

A dimension in which events can be ordered from the past through the present into the future, and also the measure of durations of events and the intervals between them.