When interest is compounded more than once a year, the effective annual rate (APR) is lower...

When interest is compounded more than once a year, the effective annual rate (APR) is lower than the quoted rate. true , false

Expert Solution

Answer: False

When interest is compounded more than once a year, effective annual rate is higher than the quoted rate. This is because number of times interest earned is more and the investor gets a chance to earn interest on interest,

jeff jeffy answered 2 years ago

When compounding occurs more than once per year, will the annual effective interest rate be higher...

When compounding occurs more than once per year, will the annual effective interest rate be higher or lower than the nominal rate? Use an example to demonstrate your explanation.

The APR on a loan is 13.45%, compounded monthly. What is the effective semi-annual rate? Select...

The APR on a loan is 13.45%, compounded monthly. What is the effective semi-annual rate? Select one: a. 6.725% b. 6.916% c. 7.225% d. One cannot compare rates with different compounding frequencies.

a. What is the effective annual interest rate (EAR) of the APR of 10.5% given that...

a. What is the effective annual interest rate (EAR) of the APR of 10.5% given that it is compounded quarterly? Monthly? Annually? Daily? b. If you purchase a new home for $250,000 today, what is your monthly payment if you have to pay 4.25% annual interest compounded monthly? Assume a 30‐year fixed mortgage (360 months) and 25% down on the home (this is of the purchase price above).

Question #3: Interest rates are quoted either as Annual Percentage Rate (APR) or Effective Annual Rate...

Question #3: Interest rates are quoted either as Annual Percentage Rate (APR) or Effective Annual Rate (EAR) Required: What is the difference between an Annual Percentage Rate and an Effective Annual Rate?

effective annual interest rate

You have received a loan from a bank with a quoted rate of 18 percent compounded monthly. What is the Effective annual interest rate of the loan?

Suppose the 1-year effective annual interest rate is 4.6% and the 2-year effective rate is 3.2%....

Suppose the 1-year effective annual interest rate is 4.6% and the 2-year effective rate is 3.2%. Compute the fixed rate in a 2-year amortizing interest rate swap based on $440,000 of notional principal in the first year and $240,000 in the second year. Please show steps a. 4.11% b. 3.91% c. 4.69% d. 3.22% e. 3.63%

What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)?...

What is the difference between the annual percentage rate (APR) and the effective annual rate (EAR)? Which rate do you believe is more relevant for financial decisions and why?

What is the effective annual rate of 8% compounded daily?

1. Juliet has a 10-year mortgage of $500,000 with an interest rate of 3.5% APR, compounded...

1. Juliet has a 10-year mortgage of $500,000 with an interest rate of 3.5% APR, compounded quarterly. Mortgage payments are made at the beginning of each month. What is the balance remaining on this mortgage after the 60th payment? Select one: a. $216,077 b. $270,937 c. $275,065 d. $266,797 e. $250,000

Find the effective annual interest rate (EAR) for each of the following: 7.12 percent compounded quarterly....

Find the effective annual interest rate (EAR) for each of the following: 7.12 percent compounded quarterly. (Round answer to 2 decimal places, e.g. 15.25%.) 5.87 percent compounded monthly. (Round answer to 2 decimal places, e.g. 15.25%.) 7.07 percent compounded semiannually. (Round answer to 2 decimal places, e.g. 15.25%.) 6.36 percent compounded daily. (Round answer to 2 decimal places, e.g. 15.25%. Use 365 days for calculation.)

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