If a bank compounds savings accounts quarterly, the effective annual rate will exceed the nominal rate.

Name: If a bank compounds savings accounts quarterly, the effective annual rate will exceed the nominal rate.
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Quizplus · Accepted Answer

Compounding more frequently than annually (e.g. quarterly in this case) will increase the effective annual rate, as interest earned in each quarter is reinvested and earns additional interest for the remaining quarters of the year.

If a Bank Compounds Savings Accounts Quarterly, the Effective Annual