0. 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 Bank As effective annual rate, but interest is to be compounded on a monthly basis. (4 marks)
1. What is the effective annual rate for bank A. (2 marks)
2. Do you think the nominal interest rate for B will be higher or lower than the nominal interest rate for A. Explain your answer. (2 marks)