The bank states they will charge you annual interest of 20% APR and interest is calculated (compounded) daily. Assume 365 days in a year. A) What is the daily interest charge? 20%/365? .055% B) What is the effective annual interest rate? (1+(20%/365))^365-1? 22.23% C) What is the simple interest over 2 years? And what is the effective interest over 2 years? Simple interest- 20%x2= 40% Effective interest- (1+(20%/365))^720-1= 48.35%

The bank states they will charge you annual interest of 20% APR and interest is calculated (compounded) daily. Assume 365 days in a year. A) What is the daily interest charge? 20%/365? .055% B) What is the effective annual interest rate? (1+(20%/365))^365-1? 22.23% C) What is the simple interest over 2 years? And what is the effective interest over 2 years? Simple interest- 20%x2= 40% Effective interest- (1+(20%/365))^720-1= 48.35%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 31P

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