Question

Find the APR, or stated rate, for an effective rate (EAR) of 17.4 percent compounded continuously. (Enter your answer as a percentage, omit the "%" sign in your response, and round your answer to 2 decimal places. For example, 0.12345 or 12.345% should be entered as 12.35.)

Answer 1

Here effective annual rate (compounded continuously) = 17.4%

In case continuous compounding

Effective Annual rate (EAR) = e^APR - 1

17.4% = e^APR - 1

1+ 17.4% = e^APR

1 + 0.1740 = e^APR

e^APR = 1.1740

Taking natural log both the sides

ln e^APR = ln 1.1740

APR = ln 1.1740

To find ln 1.1740 we will use ln function in excel

Formula to be used in excel: =ln(number)

                                          =ln(1.1740)

Using excel we get, ln(1.1740) = 0.16042 = 16.042% = 16.04%

Hence APR = 16.04%