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denis23 [38]
3 years ago
11

A car loan requiring quarterly payments carries an APR of 8%. What is the effective annual rate of interest?

Business
1 answer:
ZanzabumX [31]3 years ago
6 0

Answer:

Effective annual rate 8.24%

Explanation:

We solve for the effective rate by calcualte how much is the value of the APR with quarterly compounding.

(1+\frac{APR}{M} )^m = 1 + EAR

(1+0.08/4)^4 = 1+ EAR\\(1+0.08/4)^4 -1 =  EAR\\\\EAR = 0.08243216

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