Question

Computation of the annual percentage rate (APR) recognizes interest compounding, whereas computation of the effective annual rate (EAR) does not. a. True b. False

Answer 1

Answer:

FALSE

Explanation:

This is false because computation of effective annual rate do recognize interest compounding. It is the interest rate that is earned or paid on investment or loans as a result of COMPOUNDING over a given period of time. Emphasis on the interest earned after accounting for the effects of compounding. It differs alot from annual percentage rate in that annual percentage rate does not take into consideration the effect of compounding in most part of the world.