An interest rate that has been annualized using compound interest is termed the:
A) simple interest rate.
B) annual percentage rate.
C) discounted interest rate.
D)effective annual interest rate.

Question

Quizplus · Accepted Answer

An interest rate that has been annualized using compound interest is the effective annual interest rate (EAIR), also known as the annual percentage yield (APY). This rate takes into account the effect of compounding and reflects the actual annual interest earned on an investment or loan. The simple interest rate only considers the principal amount and does not incorporate compounding. The annual percentage rate (APR) is an annualized rate that does not take into account compounding, but includes any fees or charges associated with the loan. The discounted interest rate is a rate used to discount future cash flows.

An Interest Rate That Has Been Annualized Using Compound Interest