Annual equivalent rate exam
Here we discuss annual equivalent rate (AER) in detail. For example, if an 11% interest rate is written on the instrument and the interest rate gets compounded 14 Nov 2019 A practical example of when AER comes in handy. John attempts to compare two savings accounts: Account A has an “interest rate” of 3.7% and In this example, the effective interest rate is calculated thus: Effective interest rate = (1 + .03/12)^12 - 1 = .0304 = 3.04%, where .03 is the