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Find the APR, or stated rate, given the EAR, or effective annual interest rate. Required: (a) An effective interest of 9% (quote as an APR compounded semiannually) 8.81% (b) An effective interest of 9% (quote as an APR compounded monthly) 9.20% (c) An effective interest of 19% (quote as an APR compounded weekly) 19.90% (d) An effective interest of 20% (quote as an APR with infinite, or continuous, compounding). NOTE: here you use the equation EAR = FT - 1. Don't forget that the natural log of the natural number e raised to the power X is equal to X. s 19.60% The appropriate annual discount rate for the following cash flows is 14 percent compounded quarterly. HINT: even though there is a series of cash flows, we can't use the annuity equation since the cash flows aren't constant (or growing at a constant rate). Instead you must value the cash flows using the chapter 5 formula for single cash flow, and then add them all together. The twist here is that the compounding of interest is not annual, but the cash flows are. So when you use the chapter 5 formula PV = FV / (1+r), you must first convert the APR into an EAR. Alternatively, you could simply change t to represent the number of compounding periods (4 in each year) and use the true quarterly discount rate as r, which in this case is APR/4. Year 1 2 3 4 Cash Flow $700 600 0 1,000 Required: What is the present value of the cash flows? You took out a loan with an effective annual interest rate of 14 percent. What is the equivalent quarterly (3 month) interest rate on this loan? Note: I don't want the APR, I want the EPR (the actual 3-month interest rate). 2.66%

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