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

question 139

True/False

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

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Definitions:

Coolant

A substance, typically a liquid or gas, used to reduce or regulate the temperature of a system or component.

Plutonium

A radioactive chemical element used as fuel in nuclear power plants and in the manufacture of nuclear weapons.

Nitrogen

A chemical element with symbol N and atomic number 7, making up 78% of the Earth's atmosphere by volume; it is a vital component of amino acids, proteins, and nucleic acids.

Sodium

A chemical element with the symbol Na, known for its role in nerve transmission and fluid balance in the human body.