Which of the following is NOT true about compound interest
A)As the number of compoundings increases the annual effective interest rate increases
B)As the number of compoundings increases the incremental amount of interest
Increases
C)As the number of compoundings increases the total amount of interest increases
D)As the number of compoundings increases the interest rate remains the same

Question

Quizplus · Accepted Answer

The incremental amount of interest for each compounding period does not necessarily increase as the number of compoundings increases. Instead, the effect of compounding more frequently is to increase the overall effective interest rate, leading to a higher total amount of interest over the entire period, but not necessarily increasing the incremental interest amount with each compounding period.

Which of the Following Is NOT True About Compound Interest