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our bank account pays a 6% nominal rate of interest. The interest is compounded

ID: 2675623 • Letter: O

Question

our bank account pays a 6% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
Answer
The periodic rate of interest is 1.5% and
the effective rate of interest is 3%.
The periodic rate of interest is 6% and the effective rate of interest is greater than 6%.
The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.
The periodic rate of interest is 3% and the
effective rate of interest is 6%.
The periodic rate of interest is 6% and the
effective rate of interest is also 6%.

Explanation / Answer

The periodic rate of interest is 1.5% and the effective rate of interest is greater than 6%.

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