The correct answer is: D. nominal annual rate
The nominal annual rate is the annual rate of interest that is stated on a loan or investment. It is calculated by multiplying the periodic rate by the number of compounding periods per year.
The periodic rate is the interest rate that is applied to the principal amount of a loan or investment each time it is compounded. The number of compounding periods per year is the number of times that the principal amount is compounded each year.
For example, if a loan has a nominal annual rate of 10% and is compounded monthly, the periodic rate would be 0.83% (10% / 12). The number of compounding periods per year would be 12.
The nominal annual rate is a useful way to compare the interest rates of different loans or investments. However, it is important to note that it does not take into account the effects of compounding. The effective annual rate (EAR) is a more accurate measure of the actual interest rate that will be paid on a loan or investment. The EAR takes into account the effects of compounding and is calculated as follows:
EAR = (1 + periodic rate)^number of compounding periods per year – 1
In the example above, the EAR would be 10.38%. This is because the effects of compounding cause the actual interest rate to be higher than the nominal annual rate.