What Is the Relationship Between an Annually Compounded Rate and the Annual

question 13

Multiple Choice

What is the relationship between an annually compounded rate and the annual percentage rate (APR) which is calculated for truth-in-lending laws for a loan requiring monthly payments?

• A)the APR is lower than the annually compounded rate.
• B)the APR is higher than the annually compounded rate.
• C)the APR equals the annually compounded rate.
• D)the answer depends on the interest rate.

---

Definitions:

Share Issue Costs

Expenses that a company incurs when issuing new shares, such as legal fees, accounting fees, and underwriting fees.

Fair Value

The projected proceeds from the sale of an asset or the financial burden of transferring a liability in a harmonious transaction between entities in the market at the date of measuring.

Loans Payable

Obligations of a company to repay borrowed money in the future.

Impaired

A term used to describe an asset whose market value has decreased below its book value on the balance sheet.