Question

You invested in a 3-month certificate of deposit at your bank. Your investment was $1,634, and at the end of the term you will receive $1,962.

a. What is the holding period return (HPR) on your investment? (Round your answer to 2 decimal places.)

HPR             %

b. What is the annual percentage rate (APR)? (Round your answer to 2 decimal places.)

APR             %

c. What is the effective annual rate (EAR)? (Round your answer to 2 decimal places.)

EAR             %

Answer 1

a.
	HPR	=	(P1-P0)/P0
		=	(1962-1634)/1634
		=	20.07%
	Where,
	P0	=	Investment	=	$       1,634
	P1	=	Future Value	=	$       1,962
b.	APR	=	HPR	*	12/3
		=	20.07%	*	12/3
		=	80.29%
c.	EAR	=	((1+i)^n)-1	Where,
		=	((1+0.2007)^4)-1	i	=	20.07%
		=	107.87%		n	=	4