Question

need help with this question.

Elliott Credit Corp, wants to earn an effective annual return on its consumer loans of 15.7 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 a year. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 3216.) Interest rate ces

Answer 1

The below formula can be used to calculate APR:

$EAR=\left ( 1+\frac{APR}{365} \right )^{365}-1$

EAR is 15.7%.

0.157 = (1 - APR 365 0.157 = (1+ 365 ) 1 - 1

$1.157=\left ( 1+\frac{APR}{365} \right )^{365}$

1.157365 = (1+ APR 365

APR 1.000399615 = (1+7 365

1.000399615 – 1= APR 365

0.000399615 x 365 = APR

0.1459 = APR

APR is 14.59%.