Answer:
a. What rate would legally have to be quoted?
- banks are required to quote the APR, which in this case is 19.9%
b. What is the effective annual rate?
Step-by-step explanation:
Annual percentage rate (APR) = [($9,552 / $48,000) / 365] x 365 x 100 = 19.9%
In this case, you should only divide $9,552 / $48,000 and then multiply by 100 since the loan only lasts one year.
effective annual rate = (1 + 0.199/365)³⁶⁵ - 1 = 0.2201 = 22.1%