The effective annual rate increases when the ________ increases.
A)number of compounding periods in a year
B)number of years invested
C)quoted rate
D)both A and C
E)all of the above

Question

Quizplus · Accepted Answer

The effective annual rate is influenced by both the number of compounding periods in a year and the quoted rate. The more compounding periods there are in a year, the higher the effective annual rate will be. Similarly, an increase in the quoted rate will result in a higher effective annual rate. The number of years invested, however, does not have a direct impact on the effective annual rate.

The Effective Annual Rate Increases When the ________ Increases