APR and EAR Differences and Calculation (Intermediate Accounting I #7)

APR (Annual Percentage Rate) is a reflection of the percent owed in simple interest at the end of the year. When compounding is involved, the APR can understate the true effective APR (this term is synonymous with EAR) rate or the EAR (Effective Annual Rate). We'll go about calculating both rates in this tutorial. By the end I'll summarize it all and show the effect of compounding on APR rates (dramatically affects the rates).

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[BlooCowz]

This video cleared up an entire semester for me thank you!!!

[bigjayfitness]

you know something is wrong with the school system (university) when 2 professors over complicate such a simple idea. and I go to one of the "best" universities in Canada. Such a shame. Thank you for the video.

[mf]

Great video, the general formula is EAR=(1+APR/T)^T - 1. Where T is simply the compounding rate, which in this example was 365.
Hope this helps others.

[kendramolyet]

The chart at the end really helped! Thank you!!

[hardwarerathighlights]

u say APR is the with out compunding but at the and the APR of 20% is bigger thean EAR of 20% because of compounding. I am confused maybe somebody can help me

[min]

bless this video... it explained the concept so well

[nguyenhungangngoc]

Thanks so much for the video! Such oversimplifying!

[johanp]

You need to be careful when using the term APR. It is often confused with APRC which is the annual percent rate of cost which is defined as the interest level (nominal) that equates the present value of all drawdowns with the present value of all repayments (the present value cashflow=0).

This is the official definition used by both FCA and EU regulations. It is not in itself a complex thing to explain but it takes a bit more math and is often misunderstood.

[vladeymir]

What software do you use to make such a presentation? Thanks in advance for your reply.

[selvamkarthik]

loan amount = 20000, processing fee = 400, Disbursed amount = 19600, interest = 3274, Total Payment by Customer = 23274, Tenor Years = 24 Months, Emi Monthly = 970, I have this question. How to calculate APR for this amount please tell me formula and explain, it is my request please help me.