7)

Which of the following is CORRECT? When discounting an amount to be received in one year's time at a rate that is quoted as 12% compounding monthly, we can:

Select one:

A.

Discount the amount using an effective monthly rate of 1% where the number of periods is 12.

B.

Discount the amount using an effective annual rate (EAR) of 12.6825% where number of periods is 1.

C.

Discount the amount using the annual rate of 12% where number of periods is 1.

D.

Both A and B above are acceptable.