Final answer:
If the compounding period is less than one year, the Effective Annual Rate (EAR) will be greater than the Annual Percentage Rate (APR) due to interest being calculated on previously accrued interest more frequently.
Step-by-step explanation:
When the compounding period is less frequent than once per year, the Effective Annual Rate (EAR) is equal to the Annual Percentage Rate (APR). However, when the compounding period is more frequent, such as semi-annual, quarterly, or monthly, the EAR will be greater than the APR. This is because more frequent compounding results in interest being calculated on interest that has been added more frequently within the year.
Therefore, the correct answer to the question is:
b. EAR > APR