“Find The EAR In Each Of The Following Cases (Use 365 Days A Year. Do Not Round Intermediate Calculations And Round Your Final Answers To 2 Decimal Places. (e.g., 32.16)): Stated Rate (APR) Number Of Times Compounded Effective Rate (EAR) 8.3 % Quarterly % 17.3 Monthly 13.3 Daily 10.3 Infinite “
Find the EAR in each of the following cases (Use 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)):
|Stated Rate (APR)||Number of Times Compounded||Effective Rate (EAR)|
Expert Chegg Question Answer:
Effective annual rate (EAR) can be calculated using the following formula Number of periods Annual rate EffectiveAnnual Rate 1 Number of periods when the APR is 8.3% and, compounding is quarterly . The number of periods will be 4. Calculate the EAR as follows: Number of periods ive Annual Rate-Number of periods Annualrate 8.3% , 4 (1.02075)1 1.08561929707-1 -0.08561929707 or 8.56% Thus, the EAR is 8.56%. when the APR is 17.3% and, compounding is monthly The number of periods will be 12. Calculate the EAR as follows: Annual rateNber of periods Effective Annual Rate- 1+ Number of periods 17.3% )12 1+ 12 (1.014416666)-1 1.18739854284-1 -0.18739854284 or 18.74% Thus, heEARis!8.74% when the APR is 13.3% and, compounding is Daily The number of days in a year is 365. Calculate the EAR as follows: Number of periods Annualrate Effective Annual Rate 1+ Number of periods 13.3%)365 -1 365 = ( 1.0003643835)365-1 1 . 142222326949-1 -0.1422222326949 or 14.22% Thus, the EAR is 14.22%. When the APR is 10.3% and, compounding is infinite In case of continuous compounding, EAR is calculated using the following formula EARe-1 Here, Stated interest rate (APR) is i The value of exponential is 2,71828 Calculate the EAR as follows: EAR e’-1 -2.71828)10.3%-1 -1.1084913322-1 0.1084913322 or 10.8491332290 Thus, the EAR is 10.85%.
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