a bank compounds savings accounts quarterly, the nominal rate will exceed the effective annual rate.

Name: a bank compounds savings accounts quarterly, the nominal rate will exceed the effective annual rate.
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Question

Quizplus · Accepted Answer

If a bank compounds savings accounts quarterly, the effective annual rate will be higher than the nominal rate, not the other way around. This is because compounding the interest more frequently increases the overall interest earned over the course of a year.

A Bank Compounds Savings Accounts Quarterly, the Nominal Rate Will