The Effective Annual Rate (EAR)for a Loan with a Stated

question 60

Multiple Choice

The effective annual rate (EAR) for a loan with a stated APR of 10% compounded quarterly is closest to:

• A)10.52%
• B)10.38%
• C)10.25%
• D)10.00%

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Definitions:

Annual Payment

A payment made once a year for a particular commitment or service.

Accumulated Capital

The total value of all capital assets owned by an entity after depreciation and amortization.

Periodic Payment

A repeated payment made at regular intervals, such as monthly or annually.

Ordinary Annuity

An annuity in which payments are made at the end of each period, such as yearly, monthly, or quarterly.