PPT Slide

kNom = (Monthly rate)(12)

= 0.66667(12) = 8.00%.

EAR = (1 + ) - 1 = 8.30%.

or: 8 ? NOM%, 12 ? P/YR, ? EFF% = 8.30%.

Note: if interest were paid quarterly, then:

EAR = (1 + ) - 1 = 8.24%.

Daily, EAR = 8.33%.

0.08

12

0.08

4

12

4

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