Question

APY or EAR: To the nearest basis point, calculate the yield of 17% on a semi-annual, quarterly, monthly, and daily basis utilizing equation 4.14 on page 167. Show all calculations in MS Excel to the fourth decimal place.

Answer 1

Semi-annual
APR or yield= i =	17%
# of Compounding Periods per Year = n =	2
EAR = Effective Annual Rate (Real Rate that has n = 1) = (1+i/n)^n - 1
EARExcel = EFFECT(Nominal_Rate, Npery), where Nominal_Rate = APR = i and Npery = n	17.7225%
Quarterly,
APR or yield= i =	17%
# of Compounding Periods per Year = n =	4
EAR = Effective Annual Rate (Real Rate that has n = 1) = (1+i/n)^n - 1
EARExcel = EFFECT(Nominal_Rate, Npery), where Nominal_Rate = APR = i and Npery = n	18.1148%
Monthly
APR or yield= i =	17%
# of Compounding Periods per Year = n =	12
EAR = Effective Annual Rate (Real Rate that has n = 1) = (1+i/n)^n - 1
EARExcel = EFFECT(Nominal_Rate, Npery), where Nominal_Rate = APR = i and Npery = n	18.3892%
daily basis
APR or yield= i =	17%
# of Compounding Periods per Year = n =	360
EAR = Effective Annual Rate (Real Rate that has n = 1) = (1+i/n)^n - 1
EARExcel = EFFECT(Nominal_Rate, Npery), where Nominal_Rate = APR = i and Npery = n	18.5257%

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