sfung0909
Oct 1, 2007, 11:56 AM
If the Effective Annual Rate is 8.10% semi-annually, what is the Annual Percentage Rate?
ake_finance
Oct 1, 2007, 08:48 PM
Effective annual rate = (1+I)^n - 1
= (1.081)^2 -1
=0.168561 or 16.86%
ake_finance
Oct 1, 2007, 09:01 PM
**** Sory****
the above calculations is quite wrong because I just see the word annual from "Effective Annual Rate is 8.10%"
So, I will correct the calculation now.
However, you informations are quite not clear due to your question that"what is the Annual Percentage Rate?". Now I suppose that you want to find nominal annual rate because you already have effective annual rate.
Effective annual rate = (1+I)^n - 1
0.081= (1+I)^2 -1
1.081=(1+I)^2
take square root both sides
1.0397 = 1+I
0.0397 or 3.97% = I (se-mi annual)
To translate the se-mi annual into annual, 3.97% is multiplied by 2
So, the answer is 7.94%