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Basic Question 1 of 6
The effective annual interest rate is ______.
B. greater than the annual percentage rate when the number of compounding periods per year is greater than one
C. less than the annual percentage rate when the number of compounding periods per year is greater than one
A. always equal to the annual percentage rate
B. greater than the annual percentage rate when the number of compounding periods per year is greater than one
C. less than the annual percentage rate when the number of compounding periods per year is greater than one
User Contributed Comments 4
| User | Comment |
|---|---|
| imroark | More payments within a year (& compounded) will only see you earning more! Think about it intuitively... |
| mansi | its equal when the compounding period is one year. |
| Shaan23 | C is correct if the number of compounding periods per year is LESS than one. |
| sasarwar | B |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of compounding;
CFA® 2024 Level I Curriculum, Volume 1, Module 1.