1. Suppose you are given an APR of 5.3% that compounds
semiannually, what is the EAR?A. 5.3%B. 5.37%C. 5.41%D. 5.27%2. An Effective Annual Rate (EAR) _____________.A. is an interest rate expressed as if it were compounded four
times a year.B. is used to compare investments with different compoundingC. is the same as an Annual Percentage Rate (APR)D. All the above
If the APR is 4% and the compounding period is monthly, what is
the EAR?
2.Would you prefer $1000 today or $2000 in 5 years?
a.If the prevailing interest rate is 9%
b.If the prevailing interest rate is 18%
3What is the present value of a perpetuity that pays an annual cash
flow of $150 with prevailing interest rates of 5%?
4What is the present value of a perpetuity that pays its first cash
flow of $500 one year from...
APR and EAR: What is meant by the ”frequency of compounding”?
Illustrate the meaning of the “frequency of compounding” for a
one-year investment of $100 with an APR of 10% and both annual and
semiannual compounding. For a monthly rate of 1%, what is the APR
and EAR? What is the relationship--positive or negative--between
the APR and EAR and the frequency of compounding? Use the EAR
formula and make up a specific numerical example to illustrate that
(a) the EAR...
What is an APR? What is an EAR? Are they the same thing?
In general, what is the relationship between a stated interest rate
and an effective interest rate? Which is more relevant for
financial decisions?
If the APR is 8% and compounding is weekly, what is (a) the
periodic rate and (b) the EAR?
Can you explain step by step, how to understand the question?
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).