The annual effective rate of interest (ieff ) is a function of:
A)the annual nominal rate of interest (inom)
B)the number of compounding intervals per year (m)
C)the number of years (n)
D)both the nominal rate of interest and the number of compounding periods per year.

Question

Quizplus · Accepted Answer

The annual effective rate of interest takes into consideration both the nominal rate of interest and the number of compounding periods per year. Therefore, the correct choice is D, as the other options do not fully capture the necessary factors for calculating the annual effective rate of interest.

The Annual Effective Rate of Interest (Ieff ) Is a Function