Final answer:
The equivalent annual interest rate of a $700 payday loan with a $30 fee to be repaid in 20 days is 78.32%.
Step-by-step explanation:
To calculate the equivalent annual interest rate for a payday loan where a $30 fee is charged on a $700 loan that will be repaid in 20 days, one can use the formula for annual interest rate which is Annual Interest Rate = (Interest / Principal) × (365 / Days) × 100%.
Using the provided figures:
- Interest paid (fee) = $30
- Principal (loan amount) = $700
- Days the loan is held = 20 days
Plugging the numbers into the formula:
Annual Interest Rate = ($30 / $700) × (365 / 20) × 100%
Annual Interest Rate = 0.042857 × 18.25 × 100%
Annual Interest Rate = 78.3214%
Therefore, the equivalent annual interest rate of the payday loan is 78.32%.