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If the nominal interest rate on a used car loan is 9
- If the nominal interest rate on a used car loan is 9.75%, what is the effective interest rate when interest is compounded daily?
Expert Solution
Given, the interest is compounding daily, the number of days, n=365
Effective interest rate=((1+(nominal interest rate/n))^n)-1
=((1+(9.75%/365))^365)-1
=1.102397-1
=10.24%
Effective interest rate=10.24%
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