# A life insurance company pays investors 5% compounded annually on its five-year GICs. For you to be

## Question:

a. Semiannual compounding?

b. Quarterly compounding?

c. Monthly compounding?

Compounding

Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will... Nominal Rates

"Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest. The nominal...

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