Question

What is the PER, APR and the EAR for a $15,000, 9 month (short term), where...

What is the PER, APR and the EAR for a $15,000, 9 month (short term), where the stated rate is 6%

1.Use the simple interest calculation

PER

APR

EAR

2. Use the discount interest loan method

PER

APR

EAR

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Homework Answers

Answer #1

1.Use the simple interest calculation

PER = Number of Periods - 9 Months

APR = Annual Percentage Rate = Stated Interest rate = 6%

EAR = Effective Annual rate = Stated Interest Rate = 6% (EAR will be equal to APR in simple interest method)

2. Use the discount interest loan method

PER = Number of Periods - 9 Months

APR = Stated Interest rate = 6%

EAR = Effective Annual rate = [(1 + APR/12)^12 - 1]

EAR = [(1 + 0.06/12)^(12) - 1

EAR = 1.0617 - 1]

EAR = 6.17%

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