Effective annual rates decrease as ____ decrease:
A)annual percentage rates
B)number of compounding periods
C)quoted rates
D)All of the above

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) decreases as the annual percentage rate (APR), number of compounding periods, and quoted rates decrease because all these factors influence the amount of interest accumulated over a year, with fewer compounding periods or lower rates leading to lower effective annual rates.

Effective Annual Rates Decrease as ____ Decrease