dontknow1987

It depends how they provide the rate of return.

If they give the periodic rate say 10% compounded semi annually, then u need to convert it to EAR if using N yearly periods:

EAR = (1+periodic)^(m) ] - 1

periodic = stated rate / m

so in this example...10% compounded semiannually is the stated rate:

EAR = ((1 + (.10/2))^(2)) - 1 = 10.25% annual rate = use that rate with N = annual periods.

both approaches do yield the same result as long as the I and the N match in units (ie: both monthly) but I would say it is better to convert the stated rate to an annual rate for many questions.