Barcain Credit Corp. wants to earn an effective annual return on its consumer lo
ID: 2507795 • Letter: B
Question
Barcain Credit Corp. wants to earn an effective annual return on its consumer loans of 14.4 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 and round your final answer to 2 decimal places. (e.g., 32.16))
Barcain Credit Corp. wants to earn an effective annual return on its consumer loans of 14.4 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 and round your final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
APR = m * [(1+EAR)^1/m -1)
APR = 365 [(1+0.144)^1/365 -1)
= 13.46%