A bank offers a loan that will requires you to pay 6% interest compounded monthly.Which of the following is closest to the EAR charged by the bank?

Question

Quizplus · Accepted Answer

The EAR (Effective Annual Rate) formula can be calculated as EAR = (1 + (APR / m))^m - 1, where APR is the annual percentage rate and m is the number of compounding periods per year. In this case, APR is 6% and m is 12 (since it is compounded monthly), so the EAR is: EAR = (1 + (0.06 / 12))^12 - 1 = 6.17%. Therefore, option C is the closest to the EAR charged by the bank.

A Bank Offers a Loan That Will Requires You to Pay