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).

---

Definitions:

Equity

The value of ownership interest in a company, represented by the shares held by investors.

Depreciation Expense

An accounting method that allocates the cost of a tangible asset over its useful life, representing the wear and tear, deterioration, or obsolescence of the asset.