Question

You are given the opportunity to borrow $850 today and must repay $938 in 6 weeks. What is the correct EAR on this loan?

Question 14 options:

131.48%

134.85%

138.22%

141.59%

144.97%

Answer 1

Weekly rate = (938-850)/938 = 10.3529% per week.

APR = 10.3529% * 52/6 = 89.7255%

EAR is:

	Effective annual interest rate=	(1+periodic interest rate)^m   -1
rs=	Stated interest rate	89.7255%
m	number of compoundings in a year	8.67
rs/m	period interest rate	10.3529412%
	Effective annual interest rate=	(1+0.103529)^8.66666666666667    -1
	Effective annual interest rate=	134.85%

Answer is 134.85%

please rate.