Question

Hi,
Could you show me how to solve this APR problem with only using a financial calculator please?

T

f Fundamentals of Corporate Fin... U 7 8 P 13QP140P 15QP 160P170P Chapter 6 Problem 15QP vrov EAR= Effective Annual Rate Step 2 Do Calculate Annual Percentage Rate: APR-m (1 + Ear ). -- APR=365/(1+0.165) –1] APR=365|(1.166): -1] APR=365[1.0004183 – 1] APR=365 0.0004183] APR=0.1528x100 APR=15.28% Hence, Annual percentage rate becomes 15.28%

hank you in advance

Answer 1

Annual Percentage Rate (APR) is the annual rate charged for a borrowing or earned through an investment.

Here we are given the Effective Annual Rate (EAR) = 16.5%

The number of compounding periods = 365

So, to calculate the APR form EAR we have to use the ICONV ( I Convert) function on our Financial Calculators.

It can be used by pressing 2ND and then number 2 key on the calculator.

Once you press these keys you will see NOM written on the screen. NOM on our calculator means APR or nominal rate.

By pressing down once you will see EFF written on the screen, this means EAR or the effective annual rate.

By pressing down once again you will C/Y, this means the number of compounding periods in a year.

In the question we are given the EAR and number of compounding periods.

So,

Step 1 = Press 2ND.

Step 2 = Press number 2 key.

Step 3 = Leave the NOM section blank and press down key.

Step 4 = In front of EAR write 16.5 and Press ENTER.

Step 5 = Press Down.

Step 6 = Now in front of C/Y write 365 and press ENTER.

Step 7 = Press Down.

Step 8 = Now you will see NOM on the screen. To calculate NOM Press CPT (Compute)

You will get the same answer as above, 15.28% calculated on the screen. In the same way you can easily calculate EAR when APR is given in the question by using the same function, just remember to enter the values in the right place.