When calculating the effective rate of a loan, which statement or statements must be true if n is greater than 1?I. The length of the loan is greater than a single year.II. The effective rate will exceed the nominal rate.III. The interest will be compounded monthly.

In the effective-rate formula, n is the number of compounding periods per year. If n > 1, interest is compounded more than once per year, so for a positive nominal rate the effective rate exceeds the nominal rate (II). This does not mean the loan lasts more than one year, and compounding need not be monthly; it could be quarterly or another schedule. Therefore, “II only” is correct.

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