Question

The effective annual rate (EAR) for a loan with a stated APR of 11% compounded quarterly is closest to ________. A) 12.61% B) 13.75% C) 11.46% D) 14.90%

Answer 1

the closest answer choice is A) 12.61%.

Step-by-step explanation:

To calculate the effective annual rate (EAR) for a loan with a stated APR of 11% compounded quarterly, we can use the following formula:

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

where APR is the stated annual percentage rate, and n is the number of times the interest is compounded per year.

In this case, APR = 11% and the interest is compounded quarterly, so n = 4.

Plugging in the values, we get:

EAR = (1 + (0.11/4))^4 - 1

≈ 0.1261 or 12.61% (rounded to the nearest hundredth)

Therefore, the closest answer choice is A) 12.61%.