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First National Bank charges 14.1 percent compounded monthly on its business loans. First United Bank charges 14.4 percent compounded semiannually. Calculate the EAR for First National Bank and First United Bank. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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Answer:

Explanation:

Use the formula for Effective Annual Rate (EAR) to find the answers using the  is as follows;

EAR = [tex](1+\frac{APR}{m} )^{m} -1[/tex]

First National Bank:

Given APR = 14.1%

m = number of compounding periods ; monthly= 12

EAR = [tex](1+\frac{0.141}{12}) ^{12} -1[/tex]

EAR = 0.1505 or 15.05%

First United Bank:

APR = 14.4%

m = number of compounding periods; semiannually = 2

EAR = [tex](1+\frac{0.144}{2}) ^{2} -1[/tex]

EAR = 0.1492 or 14.92%

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