Question

Find the effective annual interest rate for each case. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

  

APR Compounding Period Effective Annual Rate   

12%	1 month	____%
8%	3 months	____%
10%	6 months	____%

Answer 1

EAR = [1 + (APR / m)]^m – 1

EAR = [1 + (0.12 / 12)]¹² – 1 = 0.1268 or 12.68%

EAR = [1 + (0.08 / 4)]⁴ – 1 = 0.0824 or 8.24%

EAR = [1 + (0.10 / 2)]² – 1 = 0.1025 or 10.25%