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True or false: Investment A pays an 8 % annual interest rate with quarterly compounding, which makes the effective interest rate 8 . 2 4

True or false: Investment A pays an

8 %

annual interest rate with quarterly compounding, which makes the effective interest rate

8.24 % .

Investment B pays an annual interest rate of

8.5 %

compounded annually. Although Investment B pays the higher effective annual rate, in time, Investment A will overtake Investment B because interest compounds quarterly.

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