How to Calculate the Effective Annual Rate of Interest (EAR)

This video demonstrates how to use an easy formula to calculate the Effective Annual Rate of Interest (EAR).
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[@bhagatsingh5019]

Thank you for your all beautifully explained videos.

[@ginobala20]

These videos are very informative and clear to the point, thank you for your service!

[@Edspira]

Glad you like them!

[@AhmedMohsen83]

Simple and direct . Thanks for your explanation.

[@Edspira]

Thank you sir! Best wishes

[@many214]

informative, simple, and clear. Thank you!

[@msmit245]

Thank you! It's very difficult to find a video on EAR to show my students (Khan Academy has NOTHING) and you have saved the day.

[@nytrewqq6376]

can you be my accounting teacher

[@ericyoonjae]

how about you teach it

[@silverreyes7912]

this sir, was gold

[@jtmentertainmentstudio5158]

Some books complicate a simple thing as this but you simplify ....thank you

[@cynthiajulan6614]

Thanks for the knowledge sharing

[@Clifffffffffford]

Thanks!

[@pearlcheong2178]

THANK YOU!

[@prakpath1]

Good one

[@edwardsmith1969]

Another good video- however would’ve really helped with an example. For example leasing a car for 4 years at £450 a month. Interest is 3%. What’s the ERI used for accounting...

[@jagtaransingh2314]

THANKS..

[@JoanitoLeroux]

Manz ar li bro❤

[@invictusdomini8624]

How about "continuous compound," where n is taken to infinity (result being e^i-1 for one stated interest period, and e^(i*k)-1 for k stated interest periods)? e being the irrational number starting with 2.718...

[@Hasani_VCS]

something is missing here because in my studies where i am struggling is with the fact the equation does not end after you calculate the second step some say you must raise that number to the number of periods so a good video but does not explain the full concept thank you

[@yosht6110]

watch at 1.5x speed. Much better.

[@Tekevin]

I have a quick question, if 5% was the Annual rate, would we need to divide it by 4 to get the Qrtly rate then we can compound it or am I over thinking?

[@vivianmac8168]

Is the "stated rate of interest" always annual (ie: will have to be divided by n), or can you be given a quarterly rate of interest, in which case you do not need to divide by 4?
In the latter case, what happens to the exponent part of the equation?

[@diamnny]

ok so what do you do when you are given a problem that does not give you a rate of interest charged? how do you figure that out? for example a loan of $900 was paid at the end of 6 months with a check of $915, what is the annual rate of interest charged?

[@danman6612]

I = interest amount (interest income or interest expense)
P = Principal amount
r = rate of interest per year
t = total time in years
* = multiply
/ = divide
The formula is:
I = P * r * t
To solve for r:
r = I / P * t
Your example:
I (interest expense) = 15 (the difference between the future value of the loan (915) and the present value of the loan (900))
P = 900
t = 0.5 (since it was paid within 6 months)
Calculate:
r = 15/900*0.5
r = 15/450
r = 0.0333 or 3.33%
Remember, I = P * r * t
15 (rounded off) = 900 * 3.33% * 0.5
Hope this helps.

[@isabellec290]

@@danman6612 This comment saved my grade, bless

[@danman6612]

@@isabellec290 You're most welcome, I'm glad it helped. :)

[@ericw4377]

How would you calculate what n is if given the EAR and the periodic rate (i/n)?

[@user-zq1lb3lx4m]

This is a simple calculation
step 1: take the given EAR
step 2: forget about it and go smoke some weed

[@christsaves7405]

Why not just do (i/n) ^n ? Why have 1 there just to offset it with -1?

[@brzydkareka]

Doesn't quarterly mean that n should be equal to 3?
Edit: Nevermind, my bad. N is number of how many times we compound.

[@user-zq1lb3lx4m]

how about this....instead of just editing why dont you delete your stupid comment

[@CxROME]

@@user-zq1lb3lx4m bro chill, we're all here to learn. This comment actually helped me cause I still don't understand the compounding periods and I'd appreciate other people's original wrong answers and corrected them and explaining what went wrong

[@macadaegmarlonj.4007]

Hi can you reply for me ? what if its compounding period is indicated in days.

[@meormine5896]

I guess n=365. Not sure though.

[@melaniebhoojedhur8504]

Did u use a calculator for the amount?

[@savagetheheavyrider9366]

There is a mistake that is (n) the correct is (m)

[@slavishchicken]

Cant even see it on the screen man feelsbadman monkaS

[@fortunatefuns]

Solving the problem and walking the steps was why we sat through your video. Talk less and solve more.

[@calvinator3000GT]

no help .. needed it worked out.