Answer:
Explanation:
Deposit advance charged $ 10 for a $ 100 advance and was due in 10 days.
The first step in calculation:
10 day rate = FV/PV - 1 = (100+10)/100 - 1 = 0.1 or 10%
FV - future value
PV - present value
The second step in calculation:
annual rate = 10 days rate * 365/10 = 0.1 * 365/10 = 0.1*36.5
=3.65 or 365%
The third step:
EAR = [1+ Quoted annual rate/Compounding period per year(n)]^n - 1 =
= (1+365%/36.5)^36.5 - 1 = 31.42 = 3142%
