Final answer:
The stated interest rate of a long-term note payable is not necessarily the effective rate, as they can differ due to compounding periods; therefore, the correct answer is False.
Step-by-step explanation:
When determining whether the stated interest rate of a long-term note payable is the same as the effective rate, the answer is False. The stated interest rate, also known as the nominal interest rate, is the interest rate that is agreed upon in the loan agreement. However, the effective interest rate considers the impact of compounding periods within a year and may differ from the stated rate if interest is compounded more frequently than once per year. To truly assess the cost of borrowing, one must calculate the effective rate, especially for comparison with other investment opportunities.
The stated interest rate, also known as the nominal interest rate, is the interest rate that is agreed upon in the loan agreement. The stated interest rate of a long-term note payable is not necessarily the effective rate, as they can differ due to compounding periods; therefore, the correct answer is False.