Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Assume you have two rate quotations: an APR with monthly compounding and an EAR / EFF . Which of the following is CORRECT? Choose the
Assume you have two rate quotations: an APR with monthly compounding and an EAREFF Which of the following is CORRECT? Choose the best answer.
"EAREFF is a shorthand to mean either the Effective Annual Rate EAR or the "effective" rate EFFthe two terms are interchangeable.
Group of answer choices
You can never plug in the APR to use with annual cash flows, and you can never divide the EAREFF to use with monthly cash flows
The APR can be directly used as the rate when you have annual cash flows; it is interchangeable with the EAREFF
You can use the APR with annual cash flows, but you would need to divide the EAREFF by to use it with monthly cash flows
You have to do an exponential calculation with the APR to use it with monthly cash flows, but you just need to divide the EAREFF to use it with monthly cash flows.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started