Task 38

What is the effective annual rate (EAR) for each of the following one-year, $1,000 bank loans?

a.) A loan with an APR of 5.8%, compounded monthly

The EAR in this case is............... %. (Round to one decimal place.)

b.) A loan with an APR of 5.8%, compounded annually, that also has a compensating balance requirement of 9.5% (on which no interest is paid)

The EAR in this case is................. %. (Round to one decimal place.)

c.) A loan with an APR of 5.8%, compounded annually, that has a 1.05% loan origination fee

The EAR in this case is ..............%. (Round to one decimal place.)