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Is the annual percentage rate (APR) always greater than or equal to the effective annual rate?

1) True
2) False

1 Answer

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Final answer:

The Annual Percentage Rate (APR) is not always greater than or equal to the Effective Annual Rate (EAR).

Step-by-step explanation:

The statement is False. The Annual Percentage Rate (APR) is not always greater than or equal to the Effective Annual Rate (EAR). The APR represents the yearly cost of borrowing, including interest and fees, expressed as a percentage. On the other hand, the EAR is the actual annual interest rate that takes into account compounding. Depending on the frequency of compounding, the EAR can be higher or lower than the APR.

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