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Please answer indepth. Everything else remaining same, under what situation will APR and EAR be equal?...

Please answer indepth.

Everything else remaining same, under what situation will APR and EAR be equal? Why is this true?

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Answer #1

APR (annual percentage rate) is the nominal annual rate of return on investment. This is also called stated rate. Effective annual rate (EAR) is the annual interest rate compounded more than once in a year. if an interest rate is compounded more than once (daily, weekly, monthly quarterly or semiannually) then total rate of return in year called effective annual rate.

If interest rate compounded only once in a year that is annually then Annual Percentage rate is equal to effective annual rate. again, if interest rate compounded more than once in a year then effective annual rate must be more than annual percentage rate.

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