# Answer to Question #59820 in Finance for Noja

Question #59820

1- You have just been promoted as the new assistant branch manager of a local-based

international bank. The branch manager, who is an expatriate, has asked you a question on

the different types of interest rate quotations. The question he asked is which rate should

the bank advertise on monthly-compounded loans - the nominal annual percentage rate or

the effective annual percentage rate? And which rate should the bank advertise on

quarterly-compounded savings accounts? Please explain to the branch manager which

quotation would attract consumers and why?

international bank. The branch manager, who is an expatriate, has asked you a question on

the different types of interest rate quotations. The question he asked is which rate should

the bank advertise on monthly-compounded loans - the nominal annual percentage rate or

the effective annual percentage rate? And which rate should the bank advertise on

quarterly-compounded savings accounts? Please explain to the branch manager which

quotation would attract consumers and why?

Expert's answer

If the question the manager asked is which rate should the bank advertise on monthly-compounded loans - the nominal annual percentage rate or the effective annual percentage rate, then as the effective annual percentage rate is much more higher, then the bank should advertise on the nominal annual percentage rate. And concerning the rate on quarterly-compounded savings accounts the bank should advertise on the effective annual percentage rate, because it is higher and more attractive for the customers who want to place a time deposit.

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