If you were planning to borrow money for a new house. You would look for a bank with the lowest EAR (equivalent annual rate).
When we think about a loan one component got here in our thoughts price of interest is the principal factor because this is the fee of the loan if the price of interest is decreased then the cost of borrowed cash also decreases. Now in an interest charge, we appear sort of rate of interest APR and EAR. If APR is 10% however compound month-to-month for that reason it turns out to be 10. 47% annuals on another hand if EAR is 10% then we must choose 10% EAR.
The annual equivalent rate (AER) is the actual interest price an investment, mortgage, or financial savings account will yield after accounting for compounding. AER is also known as the effective annual interest price or the annual percentage yield (APY).
The annual percentage rate (APR) is the value you pay each yr to borrow cash, inclusive of fees, expressed as a percent. The APR is a broader measure of the cost to you of borrowing cash since it reflects not best the interest charge but also the prices that you need to pay to get the loan.
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