Reference no: EM131307930
You are looking at an investment that has an effective annual rate of 14.2 percent.
(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Effective semiannual return %
Effective quarterly return %
What is the effective monthly return?
HERE IS THE SOLUTION FOR A DIFFERENT PROBLEM !!! TRY TO FIGURE IT OUT FROM THE BELOW SOLUTION! I HAVE ASKED THIS 5 times and no one has gotten it right
Here we need to convert an EAR into interest rates for different compounding periods. Using the equation for the EAR, we get:
EAR = [1 + (APR / m)]m − 1
EAR = .132 = (1 + r)2− 1 r = (1.132)1/2 − 1 r = .0640, or 6.40% per six months
EAR = .132 = (1 + r)4 − 1 r = (1.132)1/4 − 1 r = .0315, or 3.15% per quarter
EAR = .132 = (1 + r)12− 1 r = (1.132)1/12 − 1 r = .0104, or 1.04% per month
Notice that the effective six-month rate is not twice the effective quarterly rate because of the effect of compounding.
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: You are looking at an investment that has an effective annual rate of 14.2 percent. What is the effective monthly return? Here we need to convert an EAR into interest rates for different compounding periods. Using the equation for the EAR, we get: No..
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