Notes from May 25 2019.rtf - ARY or EAR =(1(ARP/k 1 k =...

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ARY or EAR = {(1 + (ARP/k)} - 1 k = number of compoonding / discounting periods per year APR / k = i is the rate at which the funds are compounded or discounted (periodic interest rate or periodic discount rate) so simplified EAR = (1 + i) k - 1 Monthly compounding is k = 12; semiannual is k = 2; annual is k = 1 So R is the annual interst/discount rate i is the periodic interst/dsct rate (APR / k) annual / # of periods k number of compounding/discounting periods / year Approach 1. Calculate i for each of the 2 periods (2.5% in this case) and use that to calculate the
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