Question

When calculating the effective rate of a loan, which statement or statements must be true if n is equal to 1? I. The nominal rate equals the effective rate. II. The length of the loan is exactly one year. III. The interest is compounded annually. A. I and III b. II and III c. I only d. III only.

Answer 1

The correct option is C, which is I only.

Given to us,

n=1,

I. The nominal rate equals the effective rate.

The nominal interest rate does not take into account the compounding period, while the effective rate does.

Therefore, the statement is true.

II. The length of the loan is exactly one year.

The length of the loan may or may not exactly be 1 year, because, in n=1, n may be quarterly or yearly. Therefore, this statement is not true.

III. The interest is compounded annually.

The length of the loan may or may not exactly be 1 year, because, in n=1, n may be quarterly or yearly. Therefore, this statement is not true.

Hence, the correct option is C, which is I only.

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Answer 2

Answer:

C

Step-by-step explanation: Just took the quiz