An APR will be equal to an effective annual rate if:
A) compounding occurs monthly.
B) compounding occurs continuously.
C) compounding occurs annually.
D) an error has occurred; these terms cannot be equal.

Question

Quizplus · Accepted Answer

The APR will be equal to the effective annual rate when compounding occurs annually, as there is no intra-year compounding to cause a difference between the nominal and effective rates.

An APR Will Be Equal to an Effective Annual Rate