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Homework answers / question archive / Calculate the EAR given the following: Stated Rate (APR, Compounding Period EA pct) 6 monthly  6

Calculate the EAR given the following: Stated Rate (APR, Compounding Period EA pct) 6 monthly  6

Finance

Calculate the EAR given the following: Stated Rate (APR, Compounding Period EA pct) 6 monthly 
6.15% 
5.84% 

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Answer

5.

Explanation

Computation of EAR:

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

Here,

i = Stated Rate or APR = 6%

n = Number of compounding periods = 12 (Monthly)

 

EAR = (1+6%/12)^12 - 1 = 6.17%