An interest rate that is compounded monthly,but is expressed as if the rate were compounded annually,is called the ________ rate.
A)stated interest
B)compound interest
C)effective annual
D)periodic interest
E)daily interest

Question

Quizplus · Accepted Answer

The effective annual rate takes into account the compounding effect of interest earned during the year and expresses it as an annual rate. It is calculated by using the formula: (1 + periodic interest rate)^n - 1, where n is the number of compounding periods in a year. Therefore, it is the best choice as it directly relates to the given scenario.

An Interest Rate That Is Compounded Monthly,but Is Expressed as If