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Vandermark Credit Corp. wants to earn an effective annual return on its consumer loans of 14.2 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

Respuesta :

Answer:

13.28%

Explanation:

Formula for effective interest rate is :

Effective interest rate = ( 1 + Nominal rate / n) ^n - 1

n: Number of compounding periods in a year

Based on given info and assume there are 365 days in a year, we have:

0.142 = (1 + Nominal rate / 365) ^ 365 - 1

--> Nominal rate = 13.28%

The rate the bank is required to report to potential borrowers is 13.28%