What is the difference stated interest rate and effective interest rate? Choose

Question

What is the difference stated interest rate and effective interest rate? Choose the correct answer below. A. The stated interest rate is the annual yield. The effective interest rate is the yield from continuous compounding. B. The stated interest rate is the percentage per compounding period. The effective interest rate is the started interest rate multiplied by the number of compounding periods. C. The stated interest rate is the rate used to calculate future value based on present value. The effective interest rate is the rate used to calculate present value based on future value. D. The stated interest rate is the annual interest rate before adjusting for compounding. The effective interest rate is the actual percentage increase after compounding.

Explanation / Answer

Option A:
The stated interest rate is the annual yield.
The effective interest rate is the yield from continuous compounding.

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