Time Value of Money: Comparing Interest Rates Different compounding periods, are used for different types of investments in order to properly compare investments or loans with different compounding periods, we need to put them on a common basis. In order to do this, you need to understand the difference between the nominat interest rate (TO) and the effective annual rate (CAR). The e interest rate is quoted by borrowers and lenders, and it is also called the annual percentage rate (APR) If the compounding periods for different securities is the same, then you Buse the APR for comparison of the securities have different compounding periods, then the must be used for comparison compounding, then the morning Here, Mis the number of compounding periods per year and Ms a ta the pendicrate (la). If a loan or investment Interest rate is also its effective annual rate. However, if compounding cours more than once a year, EAR S BINOM