QUESTION 1

As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or greater than the nominal rate on the deposit (or loan).

True

False

QUESTION 2

How much would $1, growing at 4% per year, be worth after 25 years?

	a.	$12.54
	b.	$10.67
	c.	$8.86
	d.	$2.67
	e.	$1.25

QUESTION 3

If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year.

True

False