What is the effective annual rate (EAR) of a mortgage that is advertised at 8.5 % (APR) over the next twenty years and paid with weekly payments? What is the effective annual rate (EAR) of the mortgage at 8.5 % APR with weekly payments? nothing % (Round to two decimal places.)

1. What is the effective annual rate (EAR) of a mortgage that is advertised at 8.5 % (APR) over the next twenty years and paid with weekly payments?

8.87%

2. What is the effective annual rate (EAR) of the mortgage at 8.5 % APR with weekly payments? nothing % (Round to two decimal places.)

8.86%

Explanation:

1.

APR = 8.5%

Weekly Payment

Number of years = 20

m = 52 x 20 = 1040

EAR = (1 + (0.085 / 1040) ^1040) - 1

EAR = 0.0887

EAR = 8.87%

2.

APR = 8.5%

Weekly Payment

Number of years = 1

m = 52 x 1 = 52

EAR = (1 + (0.085 / 52) ^52) - 1

EAR = 0.0886

EAR = 8.86%