Question

The First Bank of Lending lists the following APR for loans. Determine the APY, or effective interest rate, for a loan amount that is between $20,000 and $99,999. Round your answer to the nearest hundredth, if necessary.

Answer 1

Answer:

Concept:

The formula to calculate the annual percentage yield is given below as

$\begin{gathered} \text{APY}=(1+\frac{r}{n})^n-1 \\ \text{Where,} \\ r=\text{annual percentage rate}=6.99\% \\ n=\nu mber\text{ of times compounded}=365 \\ \end{gathered}$

By substituting the values, we will have

$\begin{gathered} \text{APY}=(1+\frac{r}{n})^n-1 \\ \text{APY}=(1+\frac{6.99}{365\times100})^{365}-1 \\ \text{APY}=(1+\frac{6.99}{365000})^{365}-1 \\ \text{APY}=(1+0.0001915)^{365}-1 \end{gathered}$

By simplifying further, we will have

$\begin{gathered} \text{APY}=(1+0.0001915)^{365}-1 \\ \text{APY}=1.0001915^{365}-1 \\ \text{APY}=1.0724-1 \\ \text{APY}=0.0724 \\ \text{APY}=0.0724\times100 \\ \text{APY}=7.24\% \end{gathered}$

Hence,

The final answer is=7.24%