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Question

Which one of the following has the highest effective annual rate? 6 percent compounded monthly 6 percent compounded semiannually 6 percent compounded annually 6 percent compounded quarterly All the other answers have the same effective annual rate.

Answer

As your instructor, I want to emphasize that 6 percent compounded monthly results in the highest effective annual rate. It's important to understand that the effective annual interest rate takes into account the benefits of compounding over time, which applies to any interest-bearing investment or savings account. This rate also reflects the exact percentage of interest that must be paid on outstanding debts, such as credit card balances or loans. The frequency of compounding affects the rate, which is why option 1 is the correct answer. For instance, if you have two loans with an interest rate of 10%, but one compounds once a year while the other compounds twice a year, the loan with twice-yearly compounding will have a higher effective annual interest rate. To learn more about interest, check out the following link: brainly.com/question/29945833 #SPJ4