Interest Compounded Semiannually?

Question

What would be the future value of a loan of $1,000 for two years if the bank offered a 10% interest rate compounded semiannually?

What is a EAR? When would a EAR be greater than the APR? When would the EAR be the same as a APR?

10pts for the best ANSWER to all???

Answer 1

EAR is the effective annual interest rate and APR is the annual percentage rate.

http://www.answers.com/topic/effective-a...

EAR= ((1+ .10/2)^(2))-1= .1025

FV=1000*(1.1025)^(2) = 1215.50 using the EAR and

FV=1000*(1.10)^(2)= 1210 using the APR

the EAR=APR when the compounding period is equal and Greater when the compounding period is higher.

Enjoy the link above has the formular.