Question

In: Finance

Barcain Credit Corp. wants to earn an effective annual return on its consumer loans of 14.7...

Barcain Credit Corp. wants to earn an effective annual return on its consumer loans of 14.7 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 for the year and round percentage to 2 decimal places)

Solutions

Expert Solution

APR = m[(1 + EAR)^(1/m) – 1]

APR = 365[(1.147)^(1/365) − 1]

APR = 0.1372 or 13.72%


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