Question

Question 18 1 pts Your brother has offered to loan you $500 for two years. At the end of the year you must repay him $1,300. What is the effective interest rate on this loan if interest is compounded daily? 61.25% 53.66% 80.00% 47.81% 58.50%

Answer 1

mt we know, compound interest is given by A = P(1) -(1) where, $80 principal A- Accumulated amount P Р = r= Rateo of interest M = Mumber of conversion per period = Time t Here, A= A = $ 1300 t: 2 years, m=365 p= $500, 103365 .. we are applying interest daily C To find r. so, By eq. (i) we get, 365X2 1300= 500 (ita 365 730 1300 soo és) (1+30) 26 = (1+3) now taking taking log on both sides we get, In (2.6) = ln ($11+ z Že:)30 730 In 2.6 7 =) In 2.6 30 en (lt + 36 ) ( 365) 730 en rit

=) too o.9555 = ur In ( + 76 ) ti 730 0.0013089 =en (to 365 3rs ) =) 0.0013089 е e こ = e R It a 365 ( lna = ។ =) a=eb ( 1.00 130975 - It 8 365 =) 0.00130975 = ४ 365 8 = 0.00 1309 75 x 365 = 0.478058 70.4781 47.81 こ 47.81 loo Fourth option is correct.