For a given quoted rate, the effective annual rate ______ as the compounding frequency increases.
A)does not change
B)increases
C)decreases
D)There is no connection between the effective annual rate and the quoted rate.

Question

Quizplus · Accepted Answer

The effective annual rate increases as the compounding frequency increases. This is because compounding interest more frequently results in more interest earned on the initial investment.

For a Given Quoted Rate, the Effective Annual Rate ______