In the story about the micro-enterprise loan to a small shopkeeper by the side of a cow path, it was suggested that adding an electric light bulb could extend her opening time by one hour at a total cost of Tk. (1,000 + 7,000) = Tk. 8,000. The article then calculates a daily return on that investment of 0.6801% per day. Another true story is the following: That same woman has to walk 10 miles to restock her inventory once a week, carrying replacement items over her shoulders hanging from two ends of a pole. If she could afford a small cart and had enough working capital to purchase two weeks' supply, she could make the trip once every TWO weeks. Right now she can be open just 5 days a week (one day closed on Friday for her sabbath, one day to walk to restock). If she could stay open one more day, she would be open not 10 days in two weeks but 11. Assuming her sales would be the same average on the 11th day as on the first 10, what would be her expected return on the investment in working capital and the cart (express as an Effective Annual Rate - EAR)? 

Show as a percent to two decimal places.

Answer rating: 100% (QA)

The shopkeepers daily ROI is 4125 This means that for every Tk 1 she borrowed she would earn Tk 0412... View the full answer