What is the effective annual rate for an APR of 15.70 percent compounded monthly?

Question

Question

Answer 1

Answer #1

APR = 15.70%p.a. (given)

Compounding = monthly

i/r = 15.70% / 12 months = 1.308333

EAR (Effective Annual rate) = (1+i/r)^n - 1

= (1+1.30833%)^12 - 1

= 16.88%

Hence, EAR for an APR of 15.7% compounded monthly is equal to 16.88%

Answer 2

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