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?
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).
1. What is the EAR if the APR is 15 percent compounded daily?
Enter answer with 4 decimals (e.g. 0.1234)2. What is the future value of $5,735 in 24 years assuming an
interest rate of 12 percent compoundedmonthly?