QuestionAugust 2, 2025

A 1-year loan with a 5% APR will have the most interest charged with what type of compounding? A annual B quarterly C monthly D ). daily

A 1-year loan with a 5% APR will have the most interest charged with what type of compounding? A annual B quarterly C monthly D ). daily
A 1-year loan with a 5%  APR will have the most interest charged with what type of compounding?
A annual
B quarterly
C monthly
D ). daily

Solution
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Answer

D daily Explanation 1. Identify Compounding Formula Use the formula for compound interest: A = P(1 + \frac{r}{n})^{nt}, where P is principal, r is annual interest rate, n is number of compounding periods per year, and t is time in years. 2. Compare Compounding Frequencies More frequent compounding results in more interest. Daily compounding has the highest frequency compared to annual, quarterly, and monthly.

Explanation

1. Identify Compounding Formula<br /> Use the formula for compound interest: $A = P(1 + \frac{r}{n})^{nt}$, where $P$ is principal, $r$ is annual interest rate, $n$ is number of compounding periods per year, and $t$ is time in years.<br /><br />2. Compare Compounding Frequencies<br /> More frequent compounding results in more interest. Daily compounding has the highest frequency compared to annual, quarterly, and monthly.
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