contestada

Which one of the following statements concerning interest rates is correct?a. Savers would prefer annual compounding over a monthly compounding.b. The effective annual rate decreases as the number of compounding periods per year increases.c. The effective annual rate equals the annual percentage rate when interest is compounded annually.d. Borrowers would prefer monthly compounding over annual compounding.e. For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate.

Respuesta :

Answer:

The correct answer is letter "C": The effective annual rate equals the annual percentage rate when interest is compounded annually.

Explanation:

Interest Rate is the cost of borrowing money, expressed as a percentage of the loan amount. Interest rates are the primary yardsticks for measuring how much return lenders will get.

The effective annual interest rate is a way of restating the annual interest rate so that it takes into account the effects of compounding. Using the effective annual interest rate helps us understand how differently a loan or investment performs if it compounds annually, semiannually, monthly, or in any other time frame. If compounded annually, the effective interest rate equals the annual percentage rate.

Otras preguntas