A lender offers the following "interest-free" payday loan: you can borrow $500 for 14 days with no interest payments, but a 10% "administration charges" will be deducted from your principal (that is, you will receive 90% of the amount you borrow but need to pay back 100%). What is the EAR of the loan under daily compounding?

Answer rating: 100% (QA)

To calculate the Effective Annual Rate EAR of the loan under daily compounding we can use the formul... View the full answer