Question

What is the APR of a payday loan for $1095 due in 15 days that charges a
$135 fee?

Answer 1

300%

Explanation:

I just did it.

Answer 2

295.89%

Explanation:

Let us assume the APR of the payday loan is r%.

Therefore, a $100 loan for the period of 1 year will charge $r.

So, $1095 loan for the period of 1 year will charge $
`(1095 * r )/(100)`

So, $ 1095 loan for the period of 1 months will charge $
`(1095 * r )/(100 * 12)`

Hence, $ 1095 loan for the period of 15 days will charge $
`(1095 * r )/(100 * 12 * 2)`

So,
`(1095 * r )/(100 * 12 * 2) =135`

⇒ 0.45625r = 135

⇒ r = 295.89

Therefore, the APR is 295.89%.