Which of the following statements regarding the interest rates is correct? I As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or less than the nominal rate on the deposit (or loan. Il If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year. III If a loan or an investment uses annual compounding, its nominal rate is also its effective rate I and Ill only Il and Ill only I and II only Oll only
Which of the following statements regarding the interest rates is correct? I As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always equal to or less than the nominal rate on the deposit (or loan. Il If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the periodic rate by the number of periods per year. III If a loan or an investment uses annual compounding, its nominal rate is also its effective rate I and Ill only Il and Ill only I and II only Oll only
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Which of the following statements regarding the interest rates is correct?
I As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always
equal to or less than the nominal rate on the deposit (or loan).
Il If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual
rate by multiplying the periodic rate by the number of periods per year.
III If a loan or an investment uses annual compounding, its nominal rate is also its effective
rate
I and III only
II and III only
I and II only
Il only](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4dd82855-b2a0-4ba7-835b-a20d0a44f1da%2F5347f47f-3387-41c6-9301-d867980cffcf%2Fyfukcp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Which of the following statements regarding the interest rates is correct?
I As a result of compounding, the effective annual rate on a bank deposit (or a loan) is always
equal to or less than the nominal rate on the deposit (or loan).
Il If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual
rate by multiplying the periodic rate by the number of periods per year.
III If a loan or an investment uses annual compounding, its nominal rate is also its effective
rate
I and III only
II and III only
I and II only
Il only
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