Which of the following is correct The periodic rate cannot b

Which of the following is correct?

The periodic rate cannot be the same as the effective annual rate

The periodic rate cannot equal the nominal rate

The periodic rate can equal the effective annual rate

The nominal rate takes into account compounding

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Solution

Option 3 is correct - The periodic rate can equal the effective annual rate

Periodic rate can be equal to effective annual rate, when the period is 1 year. By definition, effective interest rate is that rate which when applied to an amount for 1 year would result in same value of interest equal to a nominal rate paid n times in a year. But if this payment period is 1 year, than periodic or nominal rate would be equal to effective annual rate.