Which Is the Best Definition of an Effective Annual Rate

Multiple Choice

Which is the best definition of an effective annual rate?

A) The interest rate charged per period multiplied by the number of periods per year.
B) An annuity for which the cash flows occur at the beginning of the period.
C) A level stream of cash flows for a fixed period of time.
D) The interest rate expressed as if it were compounded once per year.
E) The interest rate expressed in terms of the interest payment made each period. Also, quoted interest rate