The Effective Annual Rate Increases When the ________ Increases

question 68

Multiple Choice

The effective annual rate increases when the ________ increases.

• A)number of compounding periods in a year
• B)number of years invested
• C)quoted rate
• D)both A and C
• E)all of the above

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Definitions:

Compounded Monthly

Interest calculation method where interest is added to the principal balance each month, influencing the next month's interest.

Variable-rate Loan

A loan where the interest rate can change over time based on an underlying benchmark or index.

Compounded Monthly

A method of calculating interest where the earned interest is added to the principal so that the balance doesn't merely grow, it grows at an increasing rate.

Combined Equivalent

A combined measure or assessment that brings together several different factors or values into a single, comprehensive figure.