you have found three investment choices for a​ one-year deposit: 11.9 % APR compounded​ monthly, 11.9 % APR compounded​ annually, and 11.2 % APR compounded daily. Compute the EAR for each investment choice.​ (Assume that there are 365 days in the​ year.) ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.) u

To compute the **Effective Annual Rate (EAR)** for each investment option, we will use the following formulas based on the compounding periods:

1. **For monthly compounding:**
   \[
   \text{EAR} = \left(1 + \frac{r}{m}\right)^m - 1
   \]
   where:
   - \( r = 0.119 \) (APR as a decimal)
   - \( m = 12 \) (compounding periods per year for monthly compounding)

2. **For annual compounding:**
   \[
   \text{EAR} = \left(1 + r\right) - 1
   \]
   where:
   - \( r = 0.119 \) (since it's compounded annually, the APR equals the EAR)

3. **For daily compounding:**
   \[
   \text{EAR} = \left(1 + \frac{r}{n}\right)^n - 1
   \]
   where:
   - \( r = 0.112 \) (APR as a decimal)
   - \( n = 365 \) (compounding periods per year for daily compounding)

Let me calculate each of these now.The **Effective Annual Rates (EAR)** for each investment choice are:

1. **11.9% APR compounded monthly:** EAR = 12.57%
2. **11.9% APR compounded annually:** EAR = 11.90%
3. **11.2% APR compounded daily:** EAR = 11.85%

Would you like further details or have any questions?

Here are 5 related questions you might find useful:
1. How does the frequency of compounding affect investment growth?
2. What is the formula for continuous compounding, and how does it compare to daily compounding?
3. How do you calculate EAR when given quarterly compounding?
4. What is the difference between APR and EAR in financial terms?
5. Can you calculate the future value of an investment based on these EARs?

**Tip:** EAR always accounts for compounding effects, while APR does not. Always use EAR when comparing investments with different compounding frequencies.

you have found three investment choices for a​ one-year deposit: 11.9 % APR compounded​ monthly, 11.9 % APR compounded​ annually, and 11.2 % APR compounded daily. Compute the EAR for each investment choice.​ (Assume that there are 365 days in the​ year.) ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.)

Calculate the Effective Annual Rate (EAR) for three different investment options: 11.9% APR compounded monthly, 11.9% APR compounded annually, and 11.2% APR compounded daily. This example covers important financial concepts such as interest compounding, exponential growth, and includes detailed formulas.

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