Quiz 2 - COMM308 QUIZ2...

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QUIZ 2 COMM 308 The quiz is due in the class on Thursday, 10/15. 1. Alpha bank offers you an interest rate of 6% compounded every six months on  your deposits, and Beta bank offers you 5.9% compounded every month.  Everything else being the same, which of these two banks would you choose and  why? A. Alpha bank because it has a higher nominal rate than Beta bank. B. Beta bank because it has a higher nominal rate than Alpha bank. C. Alpha bank because it has a higher effective annual rate than Beta bank. D. Beta bank because it has a higher effective annual rate than Alpha bank. 2. If the nominal rate is 8% compounded quarterly, which of the following  statements is true? A. The effective annual rate is 8%/1 = 8%. B. The effective half-yearly rate is 8%/2 = 4%. C. The effective quarterly rate is 8%/4 = 2%. D. The effective monthly rate is 8%/12 = 0.75%. 3. If the effective annual rate is 10%, which of the following statements is true? A. The effective half-yearly rate is 10%/2 = 5%. B. The effective quarterly rate is 10%/4 = 2.5%. C. The effective monthly rate is 10%/12 = 0.8333%. D. None of the above statements is true. 4. If the nominal rate is 9% compounded monthly, then   A. the effective half-yearly rate is 4.5%.
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B. the effective quarterly rate is 2.267%. C. the effective annual rate is 9.82%.
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Quiz 2 - COMM308 QUIZ2...

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