[sneaddj]

I know what the equation is for converting APR to EAR; but using the equation properly is my problem.

Equation is:

EAR = (1 + r)m-1


The APR is 12% compounded quarterly
Since the APR is compounded quarterly would r be determined as follows?
Compounded quarterly, m, the number of periods per yr is 4??
r = APR / m = 12% /4 = 3%

Is m in the EAR equation multiplied by the sum of (1 + r) or is it the to the power of and then -1??

[hayhand]

(12%/4)=.03+1=1.03

(1.03)^4=1.12550881-1= 12.55% or 3.1377% quarterly

[hayhand]

(12%/4)=.03+1=1.03

(1.03)^4=1.12550881-1= 12.55% or 3.1377% quarterly

[morgaine300]

hayhand, watch the dates - the thread is almost a year and a half old.

Also be careful of just answering someone's homework. Please review the guidelines that are in red print at the top of all homework help forums. This is a little borderline, but the poster was really looking for a clarification of what the letters stood for, etc. and should have been left to attempt to do the math on his/her own. This is not a huge deal since it's obvious the poster was not looking for someone to do the work, but just giving fair warning for future reference to watch out just doing people's work for them.