Which of the Following Statements Concerning the Effective Annual Rate

question 17

Multiple Choice

Which of the following statements concerning the effective annual rate are correct?
I. When making financial decisions,you should compare effective annual rates rather than annual percentage rates.
II. The more frequently interest is compounded,the higher the effective annual rate.
III. A quoted rate of 6% compounded continuously has a higher effective annual rate than if the rate were compounded daily.
IV. When borrowing and choosing which loan to accept,you should select the offer with the highest effective annual rate.

• A) I and II only
• B) I and IV only
• C) I, II, and III only
• D) II, III, and IV only
• E) I, II, III, and IV

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Definitions:

Annual Rates

The interest rate for a period of one year, often used in contexts such as loans or investments.

Diesel Fuel

A type of fuel derived from petroleum, used primarily in diesel engines, which are known for their efficiency and power.

Liter

A metric unit of volume equal to one cubic decimeter, used to measure liquids and other volumetric quantities.

Intentional Torts

Deliberate acts committed by an individual that cause harm or injury to another person, leading to civil liability.