Question

You have found thrown choice for a one year deposit 11 5% APR compounded monthly 115% APR compounded annually, and 108 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 pe han decimal place) The EAR to the foot investment choice is I (Round to three decanal places)

Answer 1

EAR = (1+APR/n)^n - 1

n = Number of compounding in a year

First investment choice :
n = 12
EAR = (1+11.5%/12)^12 - 1 =	12.126%
Second investment choice :
n = 1
EAR = (1+11.5%/1)^1 - 1 =	11.500%
Third investment choice :
n = 365
EAR = (1+10.8%/365)^365 - 1 =	11.403%