A return of 12% compounded annually is the same as a return of 1% per month.

Question

Quizplus · Accepted Answer

A return of 12% compounded annually is not the same as a return of 1% per month.

If a return of 12% is compounded annually, then the effective annual rate (EAR) would be 12.55% due to compounding.

However, if a return of 1% is earned per month, then the EAR would be higher at 12.68% due to more frequent compounding.

Therefore, the statement is false.

A Return of 12% Compounded Annually Is the Same as a Return