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l Be Safe 99% 11:00 ttu.thuraya.io Question 2 2 pts An interest rate is an effective rate under all of the following conditions, except when: The interest statement says that the interest rate is effective The interest period and compounding period are the same The interest period is shorter than the compounding period The compounding period is not stated Question 3 2 pts
Solution: The interest period is shorter than the compounding period
Explanation: The effective annual interest rate refers to real return; and calculated as:
Effective annual interest rate = [1 + {nominal rate / number of periods of compounding}) ^ (number of periods of compounding) - 1]
When the interest period is shorter than the compounding period the interest rate will not be an effective rate
