Carroll Credit Corp. wants to earn an effective annual return on its consumer loans of 18 percent

Question:

Carroll Credit Corp. wants to earn an effective annual return on its consumer loans of 18 percent per year. The bank uses daily compounding on its loans. What interest fate is the bank required by law to report to potential borrowers? Explain why this rate is misleading to an uninformed borrower.

Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will...