A three-year bank CD paying 7.40 percent compounded quarterly. Calculate effective annual
interest rate (EAR)?
Solution
Interest =7.4 or 0.074 p.a
No of periods p.a =4
EAR=(1+0.0747/4)4-1
=0.076
=7.6%.
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A three-year bank CD paying 7.40 percent compounded quarterly. Calcu.pdf
1. A three-year bank CD paying 7.40 percent compounded quarterly. Calculate effective annual
interest rate (EAR)?
Solution
Interest =7.4 or 0.074 p.a
No of periods p.a =4
EAR=(1+0.0747/4)4-1
=0.076
=7.6%