Question 1 10 pts An APR of 16% under monthly compounding gives an EAR of Note:...

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business finance

Answer 1

Answer #1

Effective annual rate=[1+Nominal interest rate/Number of compounding periods]^(Number of compounding periods) -1

For monthly compounding the number of compounding periods=12

Effective annual rate=(1+16%/12)^(12) -1
=(1.013333333)^(12) -1
=0.172270794 or 17.23% (Rounded to two decimal places)

Answer 2

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