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 = [tex][(1+EAR)^{1/n}-1]*n[/tex]
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:
⇒ [tex][(1+0.11)^{1/365}-1]*365[/tex]
= [tex][1.11^{(0.0027)}-1]*365[/tex]
= [tex][1.00028182-1]*365[/tex]
= [tex]2.81811743*10^{-4}[/tex]
= 0.1029
= 10.29 %
Thus, the interest rate the bank is required by law to report to potential borrowers = 10.29%
