The effective annual rate of an investment is equal to its quoted interest rate when the investment is compounded _____.
A)continuously
B)daily
C)monthly
D)semi-annually
E)annually

Question

The effective annual rate of an investment is equal to its quoted interest rate when the investment is compounded _____. 
A)continuously
B)daily
C)monthly
D)semi-annually
E)annually

Quizplus · Accepted Answer

The effective annual rate (EAR) of an investment is equal to its quoted interest rate when the investment is compounded annually. This is because compounding annually means interest is added once per year, making the nominal rate and the effective rate the same.

The Effective Annual Rate of an Investment Is Equal to Its