bmaggie

As the number of compounding periods increases, what is the effect on the EAR? EAR:

A) increases at an increasing rate.

B) does not increase.

C) increases at a decreasing rate.

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There is an upper limit to the EAR as the frequency of compounding increases. In the limit, with continuous compounding the EAR = e^APR –1. Hence, the EAR increases at a decreasing rate.

zaestau

 c

kison

x