# Fees (APR)

The protocol recalculates the put option premium daily, which becomes a borrower's accrued fee. We use the Black-Scholes Formula for this calculation.

### APR % Breakdown

Below are the calculations for approximate APRs users would pay based on their loan-to-value ratio (risk). 

| Loan-to-Value (LTV) | APR (Yearly) |
| :-----------------: | :----------: |
|         15%         |     \~1%     |
|         30%         |    \~16.5%   |
|         50%         |     \~76%    |

Below are the inputs we currently use for the calculation. You can find all of our deployed contracts here, look for "PremiumPricer."

<table><thead><tr><th width="328.3333333333333">Input Variable</th><th>Value</th></tr></thead><tbody><tr><td>S (Current NFT Average Floor)</td><td>Average NFT Floor Price</td></tr><tr><td>K (Strike or Borrow Amount)</td><td>Your Borrowed Amount</td></tr><tr><td><em>σ</em> (Volatility)</td><td>225%</td></tr><tr><td>r (risk-free rate)</td><td>8%</td></tr><tr><td>t (time to expiration)</td><td>1 month</td></tr></tbody></table>

All the complexities of the put options are entirely abstracted from the user. They see a standard APR for their loan.

{% hint style="info" %}
The Black Scholes Pricing Model creates a system that incentivizes healthier borrowing, in other words, those who have low Loan-To-Value loans pay significantly less than high Loan-To-Value. This safeguards our protocol from onboarding too much risk.
{% endhint %}