12b 20

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September 4, 2021 at 5:25 pm #634323

johnbriane
Member

Sir the formula of EAR
Is

(1+nominal rate / n)^n-1

In this question 12b.20

They have ignored the n which is below
Why is that sir ?

I mean the “n” denominator is ignored

September 5, 2021 at 9:46 am #634399

John Moffat
Keymaster

We would only divide by 4 to get a three monthly rate if 2.1% was the annual rate.

Since the question does not say that 2.1% is an annual rate then it must already be the 3 monthly rate and there is therefore not need to divide by 4.
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