In the previous problem, the compounding period is monthly. This assumption still holds. Since the cash flows are annual, we need to use the EAR to calculate the future value of annual cash flows. It is important to remember that you have to make sure the compounding periods of the interest rate matches with the cash flows. In this case, we have annual cash flows, so we need the EAR since it is the true annual interest rate you will earn. So, finding the EAR: