A given rate is quoted as 8% APR, but has an EAR of 8.33%. What is the rate of compounding during the year?

Name: A given rate is quoted as 8% APR, but has an EAR of 8.33%. What is the rate of compounding during the year?
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Question

Quizplus · Accepted Answer

The EAR is given by the formula (1 + APR/n)^n - 1, where n is the number of compounding periods per year. In this case, the EAR is 8.33% and the APR is 8%, so we have (1 + 0.08/n)^n - 1 = 0.0833. Solving for n, we get n = 12. Therefore, the rate of compounding is monthly.

A Given Rate Is Quoted as 8% APR, but Has