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First century bank wants to earn an effective annual return on its consumer loans of 10 percent per year. The bank uses daily compounding on its loans. By law, what interest rate is the bank required to report to potential borrowers?

How would I input this question into my financial calculator?

Answer :

TomShelby

Answer:

r = 9.5323%

Explanation:

We want an effective rate of 10% with daily compounding:

we will solve for the annual percentage rate which is the required rate per law he bank should announce

[tex](1+\frac{r}{365} )^{365} = 1.1\\r = ( \sqrt[365]{1.1} -1) \times 365[/tex]

r = 0.095322625 = 9.5323%

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