Calculate the following rates:
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The EAR of an 8% investment compounded quarterly.
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The stated interest rate of an 8% investment compounded semiannually.
I’m having problems with the second part. According to the solution sheet, the answer is (1.04)^2-1= 0.0816. ‘‘The stated interest rate of an 8% investment compounded semiannually is 8.16%’’
However, in the curriculum it says that stated annual interest rate is a quoted rate that does not account for compounding within the year. So shouldn’t the answer just be 8% because the rate shouldn’t include compounding. In my opinion, the book’s answer to part 2 is the EAR.