Find the EAR in each of the following cases. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. g., 32.16. Use 365 days in a year.) Stated Rate (APR) Number of Times Compounded Effective Rate (EAR) 10.00 % Quarterly % 16.00 Monthly % 16.00 Daily % 12.00 Semiannually.

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Business

Jamari Fitzgerald

13 July, 05:49

Find the EAR in each of the following cases. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e. g., 32.16. Use 365 days in a year.) Stated Rate (APR) Number of Times Compounded Effective Rate (EAR) 10.00 % Quarterly % 16.00 Monthly % 16.00 Daily % 12.00 Semiannually.

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Answers (1)

Know the Answer?

Ramon Burton · Answer 1

10.38%

17.23%

17.35%

12.36%

Explanation:

10% quarterly:

EAR = (1+APR/4) ^4-1

The APR is divided by 4 and raised to the power of 4 to show that interest is compounded four times a year

EAR = (1+10%/4) ^4-1=10.38%

16% monthly:

EAR = (1+APR/12) ^12-1 = (1+16%/12) ^12-1=17.23%

16% daily:

EAR = (1+APR/365) ^365-1 = (1+16%/365) ^365-1=17.35%

12% semiannually:

EAR = (1+APR/2) ^2-1 = (1+12%/2) ^2-1=12.36%

The APR is divided by 2 and raised to the power of 2 since interest compounding is twice a year