Asked by Suman Chahal on May 01, 2024
Verified
The effective annual rate will increase as the number of compounding periods per year increases.
Effective Annual Rate
The interest rate that reflects the compound interest rate paid or earned on an investment, loan, or other financial product over a year.
Compounding Periods
The frequency with which interest is added to the principal balance of an investment, affecting its overall future value.
- Grasp the concept of effective annual rate and its dependence on compounding periods.
Verified Answer
MS
Martiana SanchezMay 03, 2024
Final Answer :
True
Explanation :
This is because more frequent compounding means that the interest is being earned more often, which results in a higher overall interest rate. This is reflected in the effective annual rate calculation.
Learning Objectives
- Grasp the concept of effective annual rate and its dependence on compounding periods.
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