Your bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT? a. The periodic rate of interest is 1.5% and the effective rate of interest is 3%.
What’s the difference between A and B interest rates?
If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%. e. Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually.
Is the periodic rate of interest 3% or 6%?
The periodic rate of interest is 3% and the effective rate of interest is 6%. e. The periodic rate of interest is 6% and the effective rate of interest is also 6%. Nice work! You just studied 20 terms!
What’s the interest rate on a US Treasury bond?
Suppose the U.S. Treasury offers to sell you a bond for $597.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?
Which is an account that pays 8% nominal interest?
An account that pays 8% nominal interest with annual compounding. c. An account that pays 7% nominal interest with daily (365-day) compounding. d. An account that pays 7% nominal interest with monthly compounding. d. An account that pays 7% nominal interest with monthly compounding.
Which is bank account has the lowest annual return?
The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%. Which of the following bank account has the lowest effective annual return? a. An account that pays 8% nominal interest w/ monthly compounding. b. An account that pays 8% nominal interest with annual compounding.
What’s the difference between nominal interest and annual compounding?
An account that pays 8% nominal interest w/ monthly compounding. b. An account that pays 8% nominal interest with annual compounding. c. An account that pays 7% nominal interest with daily (365-day) compounding. d. An account that pays 7% nominal interest with monthly compounding. d.
