Is the effective rate of interest ever equal to the nominal interest rate?

Effective Rate of Interest

The actual rate of interest earned or paid on an investment or loan, accounting for the effect of compounding.

Nominal Interest Rate

The rate of interest before adjustment for inflation, representing the face value of financial transactions.

Assess different financing or investment opportunities through analysis of their effective interest rates.

Verified Answer

Final Answer :

True

Explanation :

The effective interest rate equals the nominal rate for annual compounding.

Learning Objectives

Assess different financing or investment opportunities through analysis of their effective interest rates.