Hi guys, I am a little confused by the difference between the both.
The Effective Annual rate has the follow formula, EAR = (1 + periodic rate)^n where periodic rate = Stated annual rate/no of compounding within a year
vs
The effective annual yield, EAY = (1 + HPY)^(365/t) - 1
Can someone help perhaps with an example with how they are differed?
The Effective Annual rate has the follow formula, EAR = (1 + periodic rate)^n where periodic rate = Stated annual rate/no of compounding within a year
vs
The effective annual yield, EAY = (1 + HPY)^(365/t) - 1
Can someone help perhaps with an example with how they are differed?