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

question 11

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.

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