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

Concept:

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

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

By substituting the values, we will have

`\begin{gathered} \text{APY}=(1+(r)/(n))^n-1 \\ \text{APY}=(1+(6.99)/(365*100))^(365)-1 \\ \text{APY}=(1+(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*100 \\ \text{APY}=7.24\% \end{gathered}`

Hence,

The final answer is=7.24%