Tai Credit Corp. wants to earn an effective annual return on its consumer loans
ID: 2612727 • Letter: T
Question
Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.6 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.6 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers? (Use 365 days a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Interest rate to be reported = [(1+effective annual return)^(1/n) - 1]*n
= [(1 + 0.146)]^(1/365) - 1] * 365
= 13.63%
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