In this case, we know the EAR is 18 percent, are compounding. Let q stand for the quoted rate. We EAR = [1 + (Quoted rate/m)]^m - 1 .18 = [1 + (q/12)]^12 - 1 1.18 = [1 + (q/12)]^12 We need to solve this equation for the quoted rate, we did to find an unknown interest rate in Chapter 1.18^(1/12) = 1 + (q/12) 1.18^.08333 = 1 + (q/12) 1.0139 = 1 + (q/12)