Question

Katrina is considering obtaining a payday loan. If she borrows $400, what amount of fee would she pay based on the average fee charged for payday loans?

a) $60

b) $80

c) $100

d) $120

Answer 1

a) $60

The fee Katrina would pay for a $400 payday loan, based on the average fee, is typically between $60 and $120, with $60 being at the lower end of the range.

Step-by-step explanation:

Katrina is considering obtaining a payday loan. If she borrows $400, the amount of fee she would pay based on the average fee charged for payday loans can vary widely, typically ranging from $15 to $30 for every $100 borrowed. This means on a $400 loan, the fee would typically be between $60 and $120. However, since we need to choose an option, the most accurate answer, based on the average fee, can be deduced if we consider the lower end of the range which would be $60.

Answer 2

The fee Katrina would pay on a $400 payday loan, using an average rate of $15 per $100 borrowed, would be $60.

Step-by-step explanation:

The amount of a fee that Katrina would have to pay for a payday loan depends on the average fee rate charged by payday lenders. Payday loans are known for having exceptionally high fees relative to the amount borrowed. This question does not specify the exact fee rate, but to answer this with the information typically seen with payday loans, we can use an example where the average fee might be $15 for every $100 borrowed.

To calculate the total fee on a $400 loan, divide the loan amount by 100 and then multiply by the fee rate:

• $400 ÷ 100 = 4
• 4 × $15 = $60

The answer, based on the average rate provided in this example, would be $60, which corresponds to option a).