What is the effective annual rate (EAR or EFF%) for a nominal rate of 12%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily? Solution EAR = (1 + Nominal Interest/Number of Period)^Number of Period – 1 Semi-Annual Compounding EAR = (1 + 12%/2)^2 – 1 = 12.36% Quaterly Compounding EAR = (1 + 12%/4)^4 – […]

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