Asked by Krysteena Hudson on Jul 02, 2024
Verified
The interest rate expressed as if it were compounded once per year is called the _____ rate.
A) Stated interest.
B) Compound interest.
C) Effective annual.
D) Periodic interest.
E) Daily interest.
Effective Annual Rate
The yield on a loan or investment taking into account the impact of compounding throughout a year.
Compounded
In finance, referring to the process where interest is calculated on the initial principal and also on the accumulated interest from previous periods.
Stated Interest
The annual interest rate declared on a financial instrument, such as a loan or bond, not accounting for compounding or fees.
- Comprehend the meanings and principal features of different interest rates, including Annual Percentage Rate (APR), Effective Annual Rate (EAR), and stated interest rate.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
C
Explanation :
The effective annual rate (EAR) is the interest rate expressed as if it were compounded once per year, making it a useful measure for comparing the annual interest between investments with different compounding periods.
Learning Objectives
- Comprehend the meanings and principal features of different interest rates, including Annual Percentage Rate (APR), Effective Annual Rate (EAR), and stated interest rate.