Question

What is the Annual Percentage Rate for a loan that charges $25 to borrow $300 for 14 days?

a. 83.3% APR.
b. 100.0% APR.
c. 166.7% APR.
d. 217.3% APR.

Answer 1

The Annual Percentage Rate (APR) for the loan is approximately 217.3% APR. Option d

Step-by-step explanation:

The Annual Percentage Rate (APR) for a loan can be calculated using the formula:

APR = (Finance Charge / Loan Amount) x (365 / Term)

In this case, the Finance Charge is $25 and the Loan Amount is $300. The Term is 14 days, which is equivalent to 14/365 years.

Plugging in these values into the formula:

APR = (25 / 300) x (365 / (14/365))

APR = 0.0833 x 26.0714

APR ≈ 2.173

So, the Annual Percentage Rate for the loan is approximately 217.3% APR. Option d