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%.

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%.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 3STP

See similar textbooks

Similar questions

Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? a. The periodic rate of interest is 4% and the effective rate of interest is less than 8%. b. The periodic rate of interest is 8% and the effective rate of interest is also 8%. c. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%. d. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%. e. The periodic rate of interest is 2% and the effective rate of interest is 4%.
Your bank account pays a 5% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? The periodic rate of interest is 5% and the effective rate of interest is also 5%. The periodic rate of interest is 1.25% and the effective rate of interest is 2.5%. The periodic rate of interest is 5% and the effective rate of interest is greater than 5%. The periodic rate of interest is 1.25% and the effective rate of interest is greater than 5%. The periodic rate of interest is 2.5% and the effective rate of interest is 5%.
Which of the following bank accounts has the highest effective annual return? An account that pays 8% nominal interest with daily (365-day) compounding. An account that pays 8% nominal interest with monthly compounding. An account that pays 8% nominal interest with annual compounding. An account that pays 7% nominal interest with daily (365-day) compounding. An account that pays 7% nominal interest with monthly compounding.
Bank America offers a stated annual interest rate of 5.0 percent, compounded quarterly, while Bank USA offers a stated annual interest rate of 5.10 percent, compounded monthly. In which bank should you deposit your money?
The bank states they will charge you annual interest of 20% APR and interest is calculated (compounded) daily. Assume 365 days in a year. A) What is the daily interest charge? 20%/365? .055% B) What is the effective annual interest rate? (1+(20%/365))^365-1? 22.23% C) What is the simple interest over 2 years? And what is the effective interest over 2 years? Simple interest- 20%x2= 40% Effective interest- (1+(20%/365))^720-1= 48.35% Did I go about these correctly?
Bank America offers a stated annual interest rate of 5.0 percent, compounded quarterly, while Bank USA offers a stated annual interest rate of 5.10 percent, compounded monthly. In whch bank should you deposit your money?
a bank charges one and one-half percent per month on the unpaid balance for purchases made its credit card. this is equivalent to what effective annual interest rate?
A bank quotes an interest rate of 10% pa with semi-annual compounding. Note that another way of stating this rate is that it is an annual percentage rate (APR) compounding every semi-annual.Which of the following statements about this rate is NOT correct? All percentages are given to 5 decimal places. a. Effective quarterly rate is 2.46951% per month. b. The annual percentage rate (APR) compounding every quarter is 8.79902%. c. Continuously compounded semi-annual rate is 4.87902% per quarter. d. Effective quarterly rate is 5.00000% per semi-annual. e. Continuously compounded annual rate is 9.75803% per half year.
A bank features a savings account that has an annual percentage rate of r=3.1r=3.1% with interest compounded quarterly. Breanna deposits $6,500 into the account. The account balance can be modeled by the exponential formula S(t)=P(1+rn)ntS(t)=P(1+rn)nt, where SS is the future value, PP is the present value, rr is the annual percentage rate written as a decimal, nn is the number of times each year that the interest is compounded, and tt is the time in years. (A) What values should be used for PP, r, and nn? P=P= , r=r= , n=n= (B) How much money will Breanna have in the account in 88 years? Answer = $ . Round answer to the nearest penny.
A credit card company charges an interest rate of 1.13% per quarter on the unpaid balance of all accounts. What would be the effective rate of interest per year being charged by the company? The annual effective rate would be 4.52% The annual effective rate would be 4.60% The annual effective rate would be 4.13% The annual effective rate would be 1.13%
Assuming a 360-day year, the interest charged by the bank, at the rate of 7%, on a 90-day, discounted note payable of $124,800 is ______ .Round your answer to the nearest whole dollar. a.$2,184 b.$8,736 c.$4,368 d.$124,800
. If a bank advertises a savings account that paysan 8% nominal interest rate compounded continuously, what is the effective annual percentage rate