Calculate the EAR of 9% compounded quarterly.

Name: Calculate the EAR of 9% compounded quarterly.
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Question

Quizplus · Accepted Answer

The Effective Annual Rate (EAR) can be calculated using the formula: EAR = (1 + i/n)^(n*t) - 1, where i is the annual interest rate, n is the number of compounding periods per year, and t is the time in years. For a 9% interest rate compounded quarterly, i = 0.09, n = 4, and t = 1. Plugging these values into the formula gives EAR = (1 + 0.09/4)^(4*1) - 1 = (1 + 0.0225)^4 - 1 ≈ 0.0931 or 9.31%.

Calculate the EAR of 9% Compounded Quarterly