Question

Friendly’s quick loans, inc., offers you "five for four, or i knock on your door." this means that you get $4 today and must repay $5 when you get your paycheck in one week (or else).

Answer 1

The answer is 1300%.

Step-by-step explanation:

As, Pv = Fv÷ (1+r)

$4 = $5 ÷(1+r)

r = ($5÷$4) -1

r = $1.25 -1

r = 0.25 or 25%.

Annual percentage = 25% x number of weeks per year

= 25% x 52 weeks

= 1300%.

Answer 2

If the person doesn't pay the $ 5 when they receive their weekly check, they will most certainly:

• Friendly’s quick loans, inc. will initiate collection actions with the required interest, which will no longer only be 25% ($ 1) for a week, action implicitly mentioned in the sentence "or I knock on your door."

Step-by-step explanation:

Companies that make express loans with little money sustain their business by cash flow, that is, they lend little money to very short periods of time so that they constantly have money to continue lending and obtain greater profits in short terms, Therefore, failing to obtain their money after a week could compel them to take legal action to collect their money and interest on late payment. However, it cannot be denied that some of these lenders carry out bullying to compel their debtors to pay them, a case that could also arise given the connotation of the final sentence.