Effective Annual Rate EAR versus Annual Percentage Rate APR Effective Annual

Effective annual rate ear versus annual percentage

This preview shows page 8 - 12 out of 68 pages.

𝑟−? Effective Annual Rate (EAR) versus Annual Percentage Rate (APR) Effective Annual Rate Annual Percentage Rate Interest rate expressed as if it were compounded once per year. ??? = [1 + 𝐴𝑃𝑅 ? ] ? − 1 Note: Interest rate must MATCH time period. Annual percentage Rate required by law to be disclosed for consumer credit. Period rate = APR / No. of periods per year Stated / quoted interest rate: Interest rate expressed in terms of the interest payment made each period. ??? = ?[(1 + ???) 1 𝑚 − 1]
Image of page 8