As a Result of Compounding, the Effective Annual Rate on a Bank

question 57

True/False

As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or greater than the nominal rate on the deposit (or loan).

---

Definitions:

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including material and labor costs.

Law Firm

A business entity formed by one or more lawyers to engage in the practice of law, providing advice to clients and representing them in legal matters.

Expense Accounts

Accounts used to track the expenditures incurred by a business, categorized for financial reporting and analysis.

Debit Balances

Amounts owed in an account, typically representing assets or expenses, that indicate the total charges or costs.