Problems

  1. Periodic interest rates. In the following table, fill in the periodic rates and the effective annual rates.

    Period APR Compounding per Year Periodic Rate Effective Annual Rate
    Semiannual 8% 2
    Quarterly 9% 4
    Monthly 7.5% 12
    Daily 4.25% 365

  2. Periodic interest rates. You have a savings account in which you leave the funds for one year without adding to or withdrawing from the account. What would you rather have: a daily compounded rate of 0.045%, a weekly compounded rate of 0.305%, a monthly compounded rate of 1.35%, a quarterly compounded rate of 4.15%, a semiannually compounded rate of 8.5%, or an annually compounded rate of 17%?

  3. EAR. What is the EAR of a mortgage that is advertised at 7.75% (APR) over the next ...

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