The effective rate (APY)can be calculated by the interest for one year divided by the principal.

Name: The effective rate (APY)can be calculated by the interest for one year divided by the principal.
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Question

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The effective rate (APY) is calculated using the formula (1 + (nominal rate / n))^n - 1, where n is the number of compounding periods per year. When n approaches infinity, the effective rate approaches the nominal rate. Therefore, the effective rate is always greater than or equal to the nominal rate.

The Effective Rate (APY)can Be Calculated by the Interest for One