ABC Bank wants to earn an effective annual return on its consumer loans of 5.00% per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers(Stated rate)?
Added by Carolyn S.
Step 1
The formula to convert the stated rate to the effective rate with daily compounding is: \[ EAR = \left(1 + \frac{APR}{n}\right)^{n} - 1 \] where \( n \) is the number of compounding periods per year. For daily compounding, \( n = 365 \). Show more…
Show all steps
Your feedback will help us improve your experience
Supreeta N and 86 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Elliott Credit Corp. wants to earn an effective annual return on its consumer loans of 15.1 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?
Supreeta N.
Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 14.25 percent per year. The bank uses daily compounding on its loans. Required: What interest rate is the bank required by law to report to potential borrowers? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Use 365 days in a year. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) Interest rate %
Nick J.
The quoted interest rate is 5.3% (APR with quarterly compounding).What is the effective daily rate?
William F.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD