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erinolson07cats
07.11.2020 •
Mathematics
You want to earn an EAR of 12.682%. Therefore, you would pick an investment with a quoted interest rate of APR with monthly compounding:
A) 12.30%
B) 12.68%
C) 12.00%
D) 12.28%
E) None of the above
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Ответ:
The correct option is C) 12.00%.
Step-by-step explanation:
This can be calculated using the formula for calculating the effective annual rate (EAR) as follows:
EAR = ((1 + (i / n))^n) - 1 (1)
Where;
EAR = effective annual rate = 12.682%, or 0.12682
i = annual percentage rate (APR) = ?
n = Number of compounding periods or months = 12
Substituting the values into equation (1) and solve for i, we have:
0.12682 = ((1 + (i / 12))^12) - 1
0.12682 + 1 = (1 + (i / 12))^12
1.12682 = (1 + (i / 12))^12
(1.12682)^(1/12) = (1 + (i / 12))^(12/12)
1.12682^0.0833333333333333 = 1 + (i / 12)
1.00999962428035 - 1 = i / 12
0.00999962428035 = i / 12
i = 0.00999962428035 * 12
i = 0.119995491364199, or 11.9995491364199%
Approximating to 2 decimal places, we have:
i = 12.00%
Therefore, the correct option is C) 12.00%.
Ответ: