The effective annual rate (EAR)for a savings account with a stated APR of 4% compounded daily (use 365-day year)is closest to:
A)3.92%.
B)4.00%.
C)4.08%.
D)14.60%.

Question

Quizplus · Accepted Answer

The formula for EAR is (1 + (APR/n))^n - 1, where n is the number of compounding periods per year. For this savings account, n = 365 (compounded daily), so EAR = (1 + (0.04/365))^365 - 1 = 0.0408, or 4.08%. Therefore, the closest choice is C.

The Effective Annual Rate (EAR)for a Savings Account with a Stated