The PC Financial Is Considering Changing the Method of Compounding

question 11

Multiple Choice

The PC financial is considering changing the method of compounding interest on line of credit accounts to daily compounding. If the current rate is 5.75% compounded quarterly, what nominal rate should PC Financial propose to maintain the same effective rate of interest?

• A) 0.576%
• B) 0.016%
• C) 1.6%
• D) 5.719%
• E) 4.61%

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Definitions:

Denial

A psychological defense mechanism where an individual refuses to accept reality or facts, thus avoiding a psychologically uncomfortable truth.

Terminal Illness

A terminal illness is a disease or condition that is considered incurable and is likely to lead to death.

Credible Evidence

Information or testimony that is believable and reliable, often used in the context of legal proceedings or scientific research.

Reaction Formation

A defense mechanism where an individual unconsciously transforms an undesirable thought or feeling into its opposite.