What Effective Annual Rate Can a Bank Earn on an APR

question 24

Multiple Choice

What effective annual rate can a bank earn on an APR of 10.5 percent, compounded monthly?

• A)10.50 percent
• B)10.76 percent
• C)11.84 percent
• D)11.02 percent
• E)13.08 percent

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Definitions:

Nominal GDP

The market value of all final goods and services produced within a country in a given period, measured using current prices without adjustment for inflation.

Real GDP

An assessment of a country's economic production that is corrected for price fluctuations due to inflation or deflation, demonstrating the actual volume of goods and services created.

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar GDP, reflecting the effects of inflation.

Inflation Rate

An upward adjustment in the price levels of goods and services witnessed in an economy over a set period.