The EAR is 5.85% if the APR is 5.85% and compounding is annual
Indicate whether the statement is true or false.
Answer: TRUE
Explanation: With APR = 5.85%, C/Y = 1, periodic interest rate = r = 0.0585, we have:
EAR = [(1 + periodic rate)C/Y] - 1 = (1.0585)1 - 1 = 1.0585 - 1 = 0.0585 or 5.85% as the EAR.
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