Please explain answer if you can! Tai Credit Corp. wants to earn an effective an

Question

Please explain answer if you can!

Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.5 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.)

Interest rate = %

Tai Credit Corp. wants to earn an effective annual return on its consumer loans of 14.5 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

EAR=(1+APR/m)^m-1

where m=compounding periods

Hence

0.145=(1+APR/365)^365-1

(1+0.145)^(1/365)=1+APR/365

APR=[(1+0.145)^(1/365)-1]*365

=13.54%(Approx)

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