Homework Answers
| The effective annual rate (EAR) | (1+i/n)^n-1 | ||
| where i is the stated rate that is 15%. | |||
| n is the number of compounding periods that is 4. | |||
| EAR | (1+.15/4)^4-1 | ||
| EAR | (1+.0375)^4-1 | ||
| EAR | (1.0375)^4-1 | ||
| EAR | 1.15865 - 1 | ||
| EAR | 0.15865 | ||
| The EAR is 15.865%. | |||
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