roblem 5-13 Calculating APR [LO 4] Find the APR, or stated rate, in each of the

Question

roblem 5-13 Calculating APR [LO 4]

Find the APR, or stated rate, in each of the following cases. (Use 365 days in a year. Enter rounded answers as directed, but do not use rounded numbers in intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)

State Rate (APR) Number of Times Compounds Effective Rate (EAR)                              % Semiannually 14.50%                              % Monthly 10.50                              % Weekly 10.50                          % Daily 8.50

Explanation / Answer

State Rate (APR) Number of Times Compounds Effective Rate (EAR) 14.01% Semiannually 14.50% 10.03% Monthly                                      10.50 9.99% Weekly                                      10.50 8.16% Daily                                         8.50 EAR = (1 + i/m)^m - 1, where 'i' is the APR and 'm' the no of times compounding is done during a year. i' = [m(EAR +1) -1]*m Substituting values and calculating, we get the values given in the APR column

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