Question 1
When you turned 20, you deposited $1,500 into an account paying interest that is compounded quarterly. You just turned 30, and there is now $2,233.30 in the account. What nominal annual interest rate is the account paying?
◦ 1.00%
◦ 4.00%
◦ 4.06%
◦ 16.24%
◦ 3.75%
Question 2
You can deposit your savings at the Darlington National Bank, which offers to pay 12.6 percent interest compounded monthly, or at the Barlett Bank, which will pay interest of 11.5 percent compounded daily. (Assume 365 days in a year.) Which bank offers the higher effective annual rate?
◦ Darlington National Bank
◦ Barlett Bank
◦ Both banks offer the same effective rate.
◦ Cannot be determined from the information provided.
◦ Workable only if the banks use the same compounding period.
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