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aleksandrvk [35]
3 years ago
7

Elliott Credit Corp. wants to earn an effective annual return on its consumer loans of 11 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?
Business
1 answer:
LenaWriter [7]3 years ago
6 0

Answer:

10.29 %

Explanation:

The interest rate that is required by the bank by the law to report to potential borrowers can be calculated by the following expression.

Interest rate to be reported = [(1+EAR)^{1/n}-1]*n

where

EAR = effective annual return rate = 11% = 0.11

n = number of days in a year = 365 days

replacing our values into the above equation; we have:

⇒ [(1+0.11)^{1/365}-1]*365

= [1.11^{(0.0027)}-1]*365

= [1.00028182-1]*365

= 2.81811743*10^{-4}

= 0.1029

= 10.29 %

Thus, the interest rate  the bank is required by law to report to potential borrowers = 10.29%

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Answer:

Increase expenditure or cut taxes to increase aggregate demand.

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A recessionary gap is a macroeconomic term which portrays an economy working at a level underneath its full-employment equilibrium. Under a recessionary gap condition, the degree of real gross domestic product (GDP) is lower than the degree of full employment, which puts descending pressure on prices over the long haul.

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B. The lender would benefit.

Explanation:

Based on the information provided within the question it can be said that in this scenario the one who would benefit from a lower inflation rate would be the lender. That is because by there being a lower inflation rate it means that the money that the borrower needs to pay back the loan does not have the buying power he predicted it would have when he borrowed it. Meaning that he would need to pay more money to the lender than originally anticipated.

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