Question

Which will have a higher effective interest rate — a payday loan for $1900 that is due in 14 days with a fee of $80, or a payday loan for $1900 that is due in 12 days with a fee of $80?

A. A payday loan for $1900 that is due in 12 days with a fee of $80, since it has the longer period

B. A payday loan for $1900 that is due in 14 days with a fee of $80, since it has the shorter period

C. A payday loan for $1900 that is due in 14 days with a fee of $80, since it has the longer period

D. A payday loan for $1900 that is due in 12 days with a fee of $80, since it has the shorter period

Answer 1

A payday loan for $1900 that is due in 12 days with a fee of $80, since it has the shorter period

Answer 2

We will find effective interest rate for each case

case-1:

a payday loan for $1900 that is due in 14 days with a fee of $80

effective interest rate =
`(1900)/(14) +80`

effective interest rate =$215.71429 per day

case-2:

a payday loan for $1900 that is due in 12 days with a fee of $80

effective interest rate =
`(1900)/(12) +80`

effective interest rate =$238.3333 per day

We can see that second interest rate is higher because number of days are lesser

so,

option-D...........Answer