Calculate the EAR of 10% compounded semi-annually.

Name: Calculate the EAR of 10% compounded semi-annually.
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Quizplus · Accepted Answer

The Effective Annual Rate (EAR) can be calculated using the formula: $EAR = (1 + \frac{r}{n})^n - 1$, where $r$ is the annual nominal rate (in decimal form) and $n$ is the number of compounding periods per year. For a 10% rate compounded semi-annually, $r = 0.10$ and $n = 2$. Thus, $EAR = (1 + \frac{0.10}{2})^2 - 1 = (1 + 0.05)^2 - 1 = 1.1025 - 1 = 0.1025$ or 10.25%.

Calculate the EAR of 10% Compounded Semi-Annually