Question

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.)

Answer 1

EAR formula:

Where,
i = Nominal interest rate
n = number of compounding in a year.

#1) 7.12 percent compounded quarterly

OR

#2) 5.87 percent compounded monthly

OR

#3) 7.07 percent compounded semiannually

OR

#4) 6.36 percent compounded daily

OR