If the Number of Compounding Intervals Are Increased Within a Year

question 2

Multiple Choice

If the number of compounding intervals are increased within a year, it will

• A) increase or decrease the effective annual interest rate depending on the coupon rate.
• B) not affect the calculation of the annual interest rate.
• C) decrease the effective annual interest rate of a low coupon bond.
• D) increase the annual effective interest rate.

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Definitions:

Japan

An island country located in East Asia, known for its rich culture, technological advancements, and distinctive historical heritage.

Collectivistic

Pertaining to cultures or societies that emphasize the group and its interests over the individual, focusing on community, cooperation, and interdependence.

India

A country in South Asia, known for its diverse culture, languages, and history; the seventh-largest country by land area and the second-most populous.

Netherlands

A country located in Northwestern Europe, known for its flat landscape, windmills, tulip fields, and cycling routes.