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1. Bank A pays 8 percent interest, compounded quarterly, on its money market account. The managers of Bank B want its money market account to equal to Bank A’s effective annual rate, but interest is to be compounded on a monthly basis. What nominal, or quoted rate must Bank B set?
a) 7.880%
b) 7.915%
c) 7.947%
d) 8.000%
e) 8.073%
2. You are offered an investment with a quoted annual interest rate of 15% with monthly compounding of interest. What is your effective annual interest rate?
a) 15.00%
b) 15.62%
c) 16.08%
d) 16.61%
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