Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? 1. The periodic rate of interest is 2% and the effective rate of interest is 4%. 2. The periodic rate of interest is 8% and the effective rate of interest is also 8%. 3. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%. 4. The periodic rate of interest is 4% and the effective rate of interest is less than 8%. 5. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.

Question
Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
1. The periodic rate of interest is 2% and the effective rate of interest is 4%.
2. The periodic rate of interest is 8% and the effective rate of interest is also 8%.
3. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%.
4. The periodic rate of interest is 4% and the effective rate of interest is less than 8%.
5. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.

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