QuestionJuly 21, 2025

True or false: The APY (annual percentage yield) is different from the effective rate. True False

True or false: The APY (annual percentage yield) is different from the effective rate. True False
True or false: The APY (annual percentage yield) is different from the effective rate.
True
False

Solution
3.7(257 votes)

Answer

False Explanation 1. Define APY and Effective Rate APY (Annual Percentage Yield) is the real rate of return earned on an investment, taking into account the effect of compounding interest. The effective rate is another term for APY when considering compounding. 2. Compare Definitions Both terms refer to the same concept of interest rate accounting for compounding, thus they are not different.

Explanation

1. Define APY and Effective Rate<br /> APY (Annual Percentage Yield) is the real rate of return earned on an investment, taking into account the effect of compounding interest. The effective rate is another term for APY when considering compounding.<br />2. Compare Definitions<br /> Both terms refer to the same concept of interest rate accounting for compounding, thus they are not different.
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