Answer:
the effective rate is higher
Step-by-step explanation:
the formula used to calculate effective rate is: effective rate = (1 + r/n)ⁿ - 1
for example, he stated rate is 6%:
- if it is compounded annually, the effective rate is 6%
- if it is compounded semiannually, the effective rate = (1 + 6%/2)² - 1 = 6.09%
- if it is compounded quarterly, the effective rate = (1 + 6%/4)⁴ - 1 = 6.14%
- and so on