A. (1+r) c – 1
B. (2+r) c – 2
C. (3+r) c – 3
D. (1+r) c – 5
✅ The correct answer is option A.
Formula of effective annual return is written as (1+r) c – 1. Effective annual return (EAR) is the annual rate that captures the magnifying effect of multiple compounding periods per year of an investment.
Formula of effective annual return is written as (1+r) c – 1. Effective annual return (EAR) is the annual rate that captures the magnifying effect of multiple compounding periods per year of an investment.