What Is the Effective Annual Rate on a Loan with an APR

question 66

Multiple Choice

What is the effective annual rate on a loan with an APR of 10.6 percent if interest is compounded daily? Assume a 365-day year.

• A)10.08%
• B)11.02%
• C)10.72%
• D)10.16%
• E)11.18%

---

Definitions:

Treasury Bond

A long-term, interest-bearing security issued by the government, with a maturity period typically longer than ten years.

Xerox

A corporation known primarily for its photocopying products and technology, though it has diversified into digital printing and document solutions.

Exxon

A multinational oil and gas corporation headquartered in the United States, known for its significant role in the global energy sector.

Coupon Bond

A type of bond that pays the holder a regular interest rate (or coupon) in addition to the principal amount at maturity.