Suppose you want to earn an effective rate of 12% and you are looking at an...

Suppose you want to earn an effective rate of 12% and you are looking at an account that compounds on a monthly basis. What APR must they pay?

Expert Solution

Effective annual rate = 12%

APR compounded monthly = n*((1 + EAR)^1/n - 1)

= 12*((1 + 0.12)^0.0833 - 1)

= 12*1.0095 - 1

= 12*0.0095

= 0.1138*100

= 11.38%

In case of any query, kindly comment on the solution.

jeff jeffy answered 2 years ago

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Suppose you want to earn an effective rate of 12% and you are looking at an...

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