The more frequently interest is compounded,
A)the higher your effective yield.
B)the lower your effective yield.
C)your effective yield stays the same.
D)there is no relationship between effective yield and compounding.

Question

Quizplus · Accepted Answer

The more frequently interest is compounded, the higher your effective yield because compounding allows for the reinvestment of earned interest, leading to exponential growth in returns. Therefore, more frequent compounding leads to a higher effective yield.

The More Frequently Interest Is Compounded