Find the APR, or stated rate, in each of the following cases. Stated Rate (APR) Number of Times...

Question:

Find the APR, or stated rate, in each of the following cases.

Stated Rate (APR) Number of Times Compounded Effective Rate (EAR)
% Semiannually 15.25%
% Monthly 11.25
% Weekly 9.75
% Daily 7.75

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

Here,

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.

Case 1:

0.1525 = (1 + APR / 2)^2 - 1

or,

APR = 14.71%

Case 2:

0.1125 = (1 + APR / 12)^12 - 1

or,

APR = 10.71%

Case 3:

0.0975 = (1 + APR / 52)^52 - 1

or,

APR = 9.31%

Case 4:

0.0775 = (1 + APR / 365)^365 - 1

or,

APR = 7.47%


Learn more about this topic:

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Effective Annual Rate: Formula & Calculations

from Business 110: Business Math

Chapter 7 / Lesson 6
15K

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