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Interpretation of Observations Data Can Be a Source of Error

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Interpretation of observations data can be a source of error.


Definitions:

Effective Rate

The actual interest rate on an investment or loan, accounting for the effect of compounding over a given period.

Deposits

Funds placed into banking institutions for safekeeping. These can be made into various types of accounts including savings, checking, and money market accounts.

Effective Rate

The actual interest rate an investor receives after the effects of compounding interest are taken into account.

Compounding Interval

The period of time at the end of which interest is added to the principal balance of an investment or loan.

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