connect FINANCE BADM 363 Business Finance: Fall 2017 (ALL SECTIONS) Chapter 5 Ho

Question

connect FINANCE BADM 363 Business Finance: Fall 2017 (ALL SECTIONS) Chapter 5 Homework (part 2) Question 1 (of 7) Save valuo 10.00 points Problem 5-12 Calculating EAR LO 4] Find the EAR in each of the following cases. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Use 365 days in a year.) Number of Times Compounded Quarterly Monthly Stated Rate (APR) Effective Rate (EAR) 1175% 14 25 17.75 13.75 Daily References eBook & Resources Difficulty: 1 Basic section: 5.3 Comparing Rates: The Effect of Compounding Periods Worksheet Problem 5-12 Calculating EAR [LO 4] Leaming Objective: 05-04 Explain how interest rates are quoted (and misquoted)

Explanation / Answer

Stated rate (APR) % Compounding Formula and Calculations EAR % 11.75 quarterly EAR = (1 + i/m)^m - 1 = (1 + 0.1175/4)^4 - 1 = 12.28 14.25 monthly EAR = (1 + i/m)^m - 1 = (1 + 0.1425/12)^12 - 1 = 15.22 17.75 daily EAR = (1 + i/m)^m - 1=(1+0.1775/365)^ 365 - 1 = 19.42 13.75 semiannually EAR = (1 + i/m)^m - 1 = (1 + 0.1375/2)^2 - 1 = 14.22

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