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 2% and the effective rate of interest is 4%.
B. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.
C. The periodic rate of interest is 4% and the effective rate of interest is less 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 8% and the effective rate of interest is also 8%.
Answer: D
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