Question 10

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 quarterly, 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 (1+0.03)^4-1 =12.5509% where number of periods is 1.

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

D. None of the above