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Part $1$

What is the effective annual rate$($EAR$)?$

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Part $1$

A$.$

It is the ratio of the number of the annual percentage rate to the number of compounding periods per year.

B$.$

It is the interest rate for an

nminus$$year

time$$ interval, where n may be more than one year or less than or equal to one year$($a fraction$).$

C$.$

It refers to the cash flows from an investment over a

oneminus$$year

period divided by the number of times that interest is compounded during the year.

D$.$

It is the interest rate that would earn the same interest with annual compounding.