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26 May, 13:17

A real estate agent knows that he will receive a commission of $4,250 from the sale of a property when the deal is completed 37 days from now. Needing cash today, though, he signs a discount note at a credit union, using his expected commission as the maturity value. The discount rate is 9.55%. Find the effective rate (APR).

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  1. 26 May, 16:43
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    The effective rate can be conveniently calculated from

    ... effective rate = r / (1-rt)

    Assuming a 365 day year, this is

    ... = 9.55% / (1 - 0.0955 * (37/365))

    ... ≈ 9.64%
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