Question

In: Finance

You are a lender. You know you want to actually gain a rate of 10% on...

You are a lender. You know you want to actually gain a rate of 10% on funds that you lend to your customers. What APR should you quote to borrowers that will make monthly payments on the loan?

0.797%

10%

9.57%

12%

Solutions

Expert Solution

9.57%

APR is the annual percentage rate which can be calculated as follows:
((1+APR/n)^n)-1 = Actual gain Where,
((1+APR/12)^12)-1 =           0.10 n = Number of times compounded in the year
(1+APR/12)^12 =           1.10
(1+APR/12) = 1.10^(1/12)
(1+APR/12) = 1.007974
APR/12 = 0.007974
APR = 9.57%

jeff jeffy answered 1 year ago
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