Question

Orlando has a loan with an effective interest rate of 7.918%, compounded annually. Which of the following must be true?

Answer 1

To clarify, the answer is choice --A.-- which is: I and II.

Took the test and got it correct. Have a good day. :)

Answer 2

The true statement is that in the effective rate formula, n is equal to one. Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or a loan. It is calculated using the formula
A= P (1 + r/100)^n, where A is the accumulated amount, P is the principal amount, r is the rate of interest within a given period and n is the interest periods.