Question

Complete the gaps in the following table:

Nominal APR	Number of Compounding Periods	Rate per Period	Equivalent Annual Rate
10.75%	52	0.207%
	4	3.12%
12%	365	0.03287%

Answer 1

Case A:

Equivalent Annual Rate = (1 + Rate per Period)^Number of Compounding Periods - 1
Equivalent Annual Rate = (1 + 0.00207)^52 - 1
Equivalent Annual Rate = 1.1135 - 1
Equivalent Annual Rate = 0.1135 or 11.35%

Case B:

Nominal APR = Rate per Period * Number of Compounding Periods
Nominal APR = 3.12% * 4
Nominal APR = 12.48%

Equivalent Annual Rate = (1 + Rate per Period)^Number of Compounding Periods - 1
Equivalent Annual Rate = (1 + 0.0312)^4 - 1
Equivalent Annual Rate = 1.1308 - 1
Equivalent Annual Rate = 0.1308 or 13.08%

Case C:

Equivalent Annual Rate = (1 + Rate per Period)^Number of Compounding Periods - 1
Equivalent Annual Rate = (1 + 0.0003287)^365 - 1
Equivalent Annual Rate = 1.1274 - 1
Equivalent Annual Rate = 0.1274 or 12.74%