Find the EAR in each of the following cases: (Use 365 days a year. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Find the EAR in each of the following cases: (Use 365 days a year. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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| Find the EAR in each of the following cases: (Use 365 days a year. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
Transcribed Image Text:Stated Rate
(APR)
8.3 %
17.3
13.3
10.3
Number of Times
Compounded
Quarterly
Monthly
Daily
Infinite
Effective Rate
(EAR)
%
Expert Solution
Step 1
EAR is the annual equivalent rate for a given interest rate after taking into consideration the effects and impacts of compounding.
EAR is the actual interest rate that one end up earning on an investment (or ends up paying on a loan) when the impact of compounding is considered over a given time period. So when you invest in something and it pays 5% with monthly compounding then in that case EAR will not be 5% but a different number.
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