Simple and compound interest rates – UGC NET Question

Statements A, B, D and E are correct. A restates the basic simple interest rule. B is true because with annual compounding, one compounding per year means effective and nominal rates coincide. D is correct since more frequent compounding at the same nominal rate increases total interest. E is also true; at low rates and short durations, simple and compound interest often differ negligibly. C is false because more frequent compounding makes the effective annual rate higher, not lower, than the nominal rate. So A, B, D and E only are correct.

Option A:
Option A is incomplete because it omits E, which notes the practical observation that, for small rates and short periods, the difference between SI and CI can be very small.

Option B:
Option B is correct since it collects all the accurate statements about calculation bases, effective rates and compounding frequency, while excluding C, which reverses the relationship between nominal and effective rates.

Option C:
Option C is wrong because it includes C, which misstates the effect of multiple compounding periods, and therefore cannot represent the full set of correct statements.

Option D:
Option D is incorrect as it retains C (false) and omits B (true), so it both includes an error and misses a key correct statement.