Relationship between the ear and the apr

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Reference no: EM131313259

Consider a borrowing arrangement in which the annual percentage rate (APR) is 8%.

a. Under what conditions does the effective annual rate of interest (EAR) differ from the APR of 8%?

b. As the frequency of compounding increases within the annual period, what happens to the relationship between the EAR and the APR?

Reference no: EM131313259

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