1. Your bank account pays an 8% nominal rate of interest. The interest is compounded quarterly. Which of the following statements is CORRECT?
a. The periodic rate of interest is 2% and the effective rate of interest is 4%.
b. The periodic rate of interest is 8% and the effective rate of interest is greater than 8%.
c. The periodic rate of interest is 4% and the effective rate of interest is less than 8%.
d. The periodic rate of interest is 2% and the effective rate of interest is greater than 8%.
e. The periodic rate of interest is 8% and the effective rate of interest is also 8%.
2. Which of the following statements is most correct?
Corporations are allowed to exclude 70% of their interest income from corporate taxes.
Corporations are allowed to exclude 70% of their dividend income from corporate taxes.
Individuals pay taxes on only 30% of the income realized from municipal bonds.
Individuals are allowed to exclude 70% of their interest income from their taxes.
Individuals are allowed to exclude 70% of their dividend income from their taxes