Question

A real estate agent knows that he will receive a commission of $4,250 from the sale of a property when the deal is completed 37 days from now. Needing cash today, though, he signs a discount note at a credit union, using his expected commission as the maturity value. The discount rate is 9.55%. Find the effective rate (APR).

Answer 1

The effective rate can be conveniently calculated from
.. effective rate = r/(1-rt)
Assuming a 365 day year, this is
.. = 9.55%/(1 -0.0955*(37/365))
.. ≈ 9.64%