1. Define and distinguish between the nominal (stated) rate of interest and the effective rate of interest. Explain why a financial institution that pays a nominal rate of 4.5 percent interest,...

1. Define and distinguish between the nominal (stated) rate of interest and the effective rate of interest. Explain why a financial institution that pays a nominal rate of 4.5 percent interest, compounded daily, actually pays an effective rate of 4.6 percent.

2. Briefly describe the basic features of each of the following savings vehicles: (a) CDs, (b) U.S. Treasury bills, (c) Series EE bonds, and (d) I savings bonds.