Question

Cheatem Loans will lend you $500 with the understanding that you will repay them $600 in one month. What is the annual percentage rate for this loan?

Answer 1

In one month, you'll pay $100 in interest. Therefore, after 12 months you would pay $1200 in interest.

Let's find what percentage this represents relative to the loan:

This way,

`\begin{gathered} x=(1200\cdot100)/(500) \\ \Rightarrow x=240 \end{gathered}`

The annual interest rate is 240%