Which one of the following statements concerning interest rates is correct? A) S

Question

Which one of the following statements concerning interest rates is correct? A) Savers would prefer annual compounding over monthly compounding. B) The effective annual rate decreases as the number of compounding periods per year increases. C) The effective annual rate equals the annual percentage rate when interest is compounded annually. D) Borrowers would prefer monthly compounding over annual compounding. E) For any positive rate of interest, the effective annual rate will always exceed the annual percentage rate.

Explanation / Answer

The Effective annual rate (EAR) equals the annual percentage rate (APR) when interest is compounded annually. Option C is correct.

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