You have found three investment choices for a one-year deposit 10.3% APR compounded monthly, 10.3% APR compounded annually, and 9.7% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) (Note: Be careful not to round any intermediate steps less than six decimal places) The EAR for the first investment choice is%. (Round to three decimal places.)
You have found three investment choices for a one-year deposit 10.3% APR compounded monthly, 10.3% APR compounded annually, and 9.7% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) (Note: Be careful not to round any intermediate steps less than six decimal places) The EAR for the first investment choice is%. (Round to three decimal places.)
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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You have found three investment choices for a one-year deposit 10.3% APR compounded monthly, 10.3% APR
compounded annually, and 9.7% APR compounded daily. Compute the EAR for each investment choice. (Assume that
there are 365 days in the year.) (Note: Be careful not to round any intermediate steps less than six decimal places)
The EAR for the first investment choice is%. (Round to three decimal places.)
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10
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Effective annual interest rate(EAR) refers to the real rate of return that we earn on our savings or pay onto a loan when the effect of the compounding period is taken into consideration. The more compounding periods, the more the effective interest rate will be, and the lower the number of compounding periods, the lower the effective interest rate. When there is only one compounding period in a year, the effective annual interest rate will b equal the stated nominal interest rate.
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