A 10% APR with quarterly compounding is is equivalent to an EAR of:
A)10.00%.
B)10.47%
C)10.38%.
D)9.81%.

Name: A 10% APR with quarterly compounding is is equivalent to an EAR of: A)10.00%. B)10.47% C)10.38%. D)9.81%.
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Question

Quizplus · Accepted Answer

The formula for EAR with quarterly compounding is EAR = (1 + r/n)^n - 1, where r is the nominal interest rate and n is the number of compounding periods. Substituting the given values, we get EAR = (1 + 0.1/4)^4 - 1 = 0.1038 or 10.38%. Therefore, choice C is the correct answer.

A 10% APR with Quarterly Compounding Is Is Equivalent to an EAR