You have found three investment choices for a one-year deposit: 12% APR compounded monthly, 11% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) For the case of 12% APR compounded monthly the EAR is %. (Round to three decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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You have found three investment choices for a one-year deposit: 12% APR compounded monthly, 11% APR compounded annually, and 10% APR
compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.)
For the case of 12% APR compounded monthly the EAR is
%. (Round to three decimal places.)
Transcribed Image Text:You have found three investment choices for a one-year deposit: 12% APR compounded monthly, 11% APR compounded annually, and 10% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.) For the case of 12% APR compounded monthly the EAR is %. (Round to three decimal places.)
Expert Solution
Given Information

Interest rate:

  1. 12% APR compounded monthly means compounding frequency is 12
  2. 11% APR compounded annually means compounding frequency is 1
  3. 10% APR compounded daily means compounding frequency is 365

To Find:

  • Effective annual rate
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