the effective interest rate b would be paying each year
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Explanation:
The effective annual interest rate is the interest rate that is actually earned or paid on an investment, loan or other financial product due to the result of compounding over a given time period. It is also called the effective interest rate, the effective rate or the annual equivalent rate.
The Formula for the Effective Annual Interest Rate
Effective Annual Interest Rate=(1+ ni) n −1
where:
where:i=Nominal interest rate
n=Number of periods
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