Assume a bank offers an effective annual rate of 7.12%. If compounding is quarterly what is the APR?
Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))
Please show all steps for better understanding! Thanks!
EAR=[(1+APR/m)^m]-1
where m=compounding periods
0.0712=[(1+APR/4)^4]-1
(1+0.0712)=[(1+APR/4)^4]
APR=[(1+0.0712)^(1/4)-1]*4
=6.9374%(Approx).
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