APR (Annual Percentage Rate): It is an annual percentage rate charged on mortgage, credit card etc. or earned on investment. It is an annual cost of borrowing the funds. It is a nominal rate or quoted rate that mentioned on a borrowing contract. It is lower than the EAR but higher than the interest rate (current rate of borrowing the amount). APR includes all the fees related to borrowing the funds. EAR (Effective Annual Rate): It is a compound interest rate that charged on borrowing fund or earned on investment. It is higher than APR. It is an amount what you actually pay or receive. As more and more compounding the interest rate the more you will get the EAR. Difference between EAR and APR: · EAR is a rate what you really pay or receive while APR is a cost of borrowing the amount. · EAR includes compounding interest while APR is based on simple interest. · EAR is used to calculate the frequently compounded interest like credit card whi
This blog is totally for education purpose which helps to solve finance related numerical like time value of money, annuity ,perpetuity, technique of capital budgeting, cost of capital, working capital management and hire purchase etc.