In: Finance
Can I get it solved step by step please with work shown
You purchased a security on 10/30/2018 at a price of $93.45. You redeemed the security on 03/27/ 2019 at a price of $99.75. Answer the following questions:
APR is 16.51% and
EAR is 17.32%.
| Number of days between 10/30/2018 to 03/27/2019 | ||||||||||||||
| Days | ||||||||||||||
| October 2018 | 2 | |||||||||||||
| November 2018 | 30 | |||||||||||||
| December 2018 | 31 | |||||||||||||
| January 2019 | 31 | |||||||||||||
| February 2019 | 28 | |||||||||||||
| March 2019 | 27 | |||||||||||||
| Total | 149 | |||||||||||||
| Return for the holding period | = | (Redemption price - Cost )/Cost | ||||||||||||
| = | (99.75-93.45)/93.45 | |||||||||||||
| = | 0.067416 | |||||||||||||
| APR | = | Holding period return *days in the year/holding period days | ||||||||||||
| (Annual percentage of return) | = | 0.067416 | *365/149 | |||||||||||
| = | 0.165146 | |||||||||||||
| So, APR is | 16.51% | |||||||||||||
| EAR | = | ((1+i/n)^n)-1 | i | APR | ||||||||||
| (Effective annual return) | = | ((1+0.1651/(365/149))^(365/149))-1 | n | number of times compounding in the year | ||||||||||
| = | 0.173246 | |||||||||||||
| So, EAR is | 17.32% | |||||||||||||