Calculate the effective annual rate for 14.4% compounded monthly.
A) 15.4%
B) 12.8%
C) 16.4%
D) 13.8%
E) 17.1%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + i/n)^(n*1) - 1, where i is the annual interest rate and n is the number of compounding periods per year. For 14.4% compounded monthly, i = 0.144 and n = 12. Plugging these values into the formula gives EAR = (1 + 0.144/12)^(12*1) - 1 = 1.154967 - 1 = 0.154967, or 15.4%.

Calculate the Effective Annual Rate for 14