Find the APR, or stated rate, in each of the following cases.
|Stated Rate (APR)||Number of Times Compounded||Effective Rate (EAR)|
APR and EAR:
APR or annual percentage rate is the stated rate of return which is divided as per the number of periods in a year to find out the periodic rate. EAR or effective annual rate is the annualized effective rate of the stated APR.
Answer and Explanation:
We will apply the EAR formula in all the cases to find out the APR
EAR = (1 + APR / n)^n - 1
EAR = Effective Annual Rate
APR = Annual percentage rate
n = Number of periods in a year, for example, 2 for semi annual, 12 for monthly, 52 for weeks and 365 for days.
0.1525 = (1 + APR / 2)^2 - 1
APR = 14.71%
0.1125 = (1 + APR / 12)^12 - 1
APR = 10.71%
0.0975 = (1 + APR / 52)^52 - 1
APR = 9.31%
0.0775 = (1 + APR / 365)^365 - 1
APR = 7.47%
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from Business 110: Business MathChapter 7 / Lesson 6