Which of the following bank accounts has the highest effective annual return O a. An account that pays 7% nominal interest with monthly compounding. b. An account that pays 8% nominal interest with monthly compounding. C. An account that pays 8% nominal interest with annual compounding. O d. An account that pays 7% nominal interest with daily (365-day) compounding. e. An account that pays 8% nominal interest with daily (365-day) compounding.

Which of the following bank accounts has the highest effective annual return O a. An account that pays 7% nominal interest with monthly compounding. b. An account that pays 8% nominal interest with monthly compounding. C. An account that pays 8% nominal interest with annual compounding. O d. An account that pays 7% nominal interest with daily (365-day) compounding. e. An account that pays 8% nominal interest with daily (365-day) compounding.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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.
Which of the following bank accounts has the lowest effective annual return? a. An account that pays 7% nominal interest with daily (365-day) compounding. b. An account that pays 7% nominal interest with monthly compounding. c. An account that pays 8% nominal interest with daily (365-day) compounding. d. An account that pays 8% nominal interest with annual compounding. e. An account that pays 8% nominal interest with monthly compounding.
Which of the following bank accounts has the lowest effective annual return? Group of answer choices 1. An account that pays 8% nominal interest with monthly compounding. 2. An account that pays 8% nominal interest with daily (365-day) compounding. 3. An account that pays 7% nominal interest with monthly compounding. 4. An account that pays 8% nominal interest with annual compounding. 5. An account that pays 7% nominal interest with daily (365-day) compounding.
. Which of the following bank accounts has the highest effective annual return? An account that pays 6% nominal interest with annual compounding. An account that pays 5% nominal interest with monthly compounding. An account that pays 6% nominal interest with daily (365-day) compounding. An account that pays 6% nominal interest with monthly compounding. An account that pays 5% nominal interest with daily (365-day) compounding.
Which one of the following bank accounts will you choose for a savings account? Bank A: An account that pays 8% nominal interest (APR) with daily (365-day)compounding. Bank B: An account that pays 8% nominal interest (APR) with annual compounding. Bank C: An account that pays 7% nominal interest (APR) with daily (365-day)compounding. Bank D: An account that pays 7% nominal interest (APR) with monthly compounding. Please explain your choice. show in excel for all choice to see calculations What is the effective annual return (EFF) of the account that you picked?
5. Which of the following bank accounts has the highest effective annual return (EAR)? a. An account that pays 8% nominal interest with 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. 6. Which of the following statements regarding a 30-year monthly payment amortized mortgage with a fixed nominal interest rate of 10% is CORRECT? a. The monthly payments will increase over time. b. A larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment. c. The total dollar amount of interest being paid off each month gets larger as the loan approaches maturity. d. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%. 7. What is the present value of the following…
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%.
which of the following banks would you choose for a savings account based on the following rates offered? 1. 6% APR compounded annually 2. 5% APR compounded annually 3. 5% APR compounded semi-annually 4. 4% APR compounded weekly 5. 6% APR compounded quarterly.
. If a bank advertises a savings account that paysan 8% nominal interest rate compounded continuously, what is the effective annual percentage rate
A bank quotes you a nominal interest rate of 12%, compounded monthly, on a savings account. What is the effective annual rate? %
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%.
A bank charges 1 ½% per month on the unpaid balance for purchases made with its credit card. This is equivalent to what effective annual interest rate?

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