Which of the Following Statements Is Most Correct

question 49

Multiple Choice

Which of the following statements is most correct?

• A) If annual compounding is used,the effective annual rate equals the simple rate.
• B) If annual compounding is used,the effective annual rate equals the periodic rate.
• C) If a loan has a 12 percent simple rate with semiannual compounding,its effective annual rate is equal to 11/66 percent.
• D) Both answers a and b are correct.
• E) Both answers a and c are correct.

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Definitions:

Scrimping

The act of saving money by spending less, often by cutting back on non-essential expenses.

Signaling

The action of sending a signal (often indirectly) to convey information or intentions in economics, particularly in markets where information is asymmetric.

Informed Party

An individual or entity possessing knowledge or information that gives them an advantage in transactions or decisions.

True Risks

The actual risks associated with an investment, activity, or decision, taking into account all factors and potential outcomes.