Beautinator Cosmetics borrowed $152,300 from a bank for three years. If the quoted rate (APR) is 11.75 percent, and the compounding is daily, what is the effective annual rate (EAR)? (Round to one decimal place.)

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 nominal rate (11.75%), n is the number of compounding periods per year (365 for daily), and t is the time in years (1 year for EAR calculation). Plugging in the values, EAR = (1 + 0.1175/365)^(365) - 1, which results in approximately 12.5%.

Beautinator Cosmetics Borrowed $152,300 from a Bank for Three Years