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What is an effective annual rate? Select one: a. It is a rate which is per...

What is an effective annual rate?

Select one:

a. It is a rate which is per annum rate compounded annually

b. None of the above

c. It is a rate which is per annum rate continuously compounded

d. It is a rate which is per annum rate compounded semi-annually

Solutions

Expert Solution

Ans- Option A. It is a rate which is per annum rate compounded annually

Effective Annual rate(EAR) is an Equivalent annual rate which is compounded annually. EAR is computed when Nominal Interest rate is compunded other than annually then it is converted into EAR compounded annually.

jeff jeffy answered 2 years ago
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