Question

Find the EAR in each of the following cases. (Use 365 days in a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) 10.2%

Answer 1

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Effective annual interest rate = (1+r/n)^n - 1

1. APR = 10.20%

Compounded time (n) = 4

Effective annual interest rate = (1 +0.1020/4)^4 -1

Effective annual interest rate = 10.60%

2. APR = 18.00%

Compounded time (n) = 12

Effective annual interest rate = (1 + 0.18/12)^12 - 1

Effective annual interest rate = 19.56%

3. APR = 13.50%

Compounded time (n) = 365

Effective annual interest rate = (1 + 0.1350/365)^365 - 1

Effective annual interest rate = 14.45%

4. APR = 9.50%

Compounded time (n) = 2

Effective annual interest rate = (1 + 0.095/2)^2 - 1

Effective annual interest rate = 9.73%