Formula required: A.E.R. <> C.A.R.

[brendan76]

Is there a formula to convert an A.E.R. ([SIZE=-1]Annual Equivalent Rate[/SIZE]) to a C.A.R. ([SIZE=-1]Compound Annual Rate[/SIZE]). In comparing interest rates by 2 banks; one uses C.A.R. and the other uses A.E.R. but which of the two banks offer the best rate.

 

[ClubMan]

Aren't they the same thing and directly comparable? Dittor for EAR?

 

[messyleo]

That's what i though clubman, but wasn't positive (i thought it might be a trick question!)

 

[Askook25]

can anybody tell the formula....

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Compound Interest Formula

 

[PMU]

The definitions are available on the Financial Regulator’s web site: http://www.itsyourmoney.ie

A.E.R. is forward looking and tells what the rate of interest would be if the nominal rate were compounded annually; C.A.R. is backward looking and is measure of your rate of return.