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Homework answers / question archive / Which of the following statements is true? a

Which of the following statements is true? a

Finance

Which of the following statements is true?

a. If interest is compounded more than once a year, the nominal annual rate is greater than the effective annual rate.

 b. If interest is compounded once a year, the nominal annual rate and the effective annual rate are equal.

 c. If interest is compounded more than once a year, the effective annual rate is greater than the nominal annual rate.

 d. (a) and (b) are both correct.

 e. (b) and (c) are both correct.

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Answer:

(a). is wrong while (b and (c ) are correct because effective annual rate (EAR) is more when compounding is more than once a year.

(b) and (c) are both correct

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