What is the appropriate interest rate to use when making future or present value calculations?

Question

Quizplus · Accepted Answer

The effective annual interest rate takes into account the compounding of interest over time and is the true cost of borrowing or the true rate of return on an investment. It reflects the actual interest rate that will be earned or paid over the period of the investment, making it the most appropriate rate to use in future or present value calculations. The annual percentage rate (APR) and the quoted interest rate do not account for compounding, while the simple interest rate does not take into account the effect of compounding over time.

What Is the Appropriate Interest Rate to Use When Making