Question

A payday loan company charges a $50 fee for a $650 payday loan that will be repaid in 13 days. treating the fee as interest paid, what is the equivalent annual interest rate? round your answer to the nearest hundredth of a percent.

Answer 1

The equivalent annual interest rate for a payday loan with a $50 fee and a $650 loan amount repaid in 13 days is approximately 474.42%.

Step-by-step explanation:

To find the equivalent annual interest rate, we need to calculate the interest paid on the payday loan fee. The fee is $50, and the loan amount is $650, which means $50 is the interest paid on the loan. Since the loan is repaid in 13 days, we need to find the annual equivalent rate. There are 365 days in a year, so we can use the formula:

Equivalent Annual Interest Rate = (Interest Paid / Loan Amount) * (365 / Number of Days)

Plugging in the values:

Equivalent Annual Interest Rate = (50/650) * (365/13)

Calculating this gives us an equivalent annual interest rate of approximately 474.42%. Rounded to the nearest hundredth of a percent, the equivalent annual interest rate is 474.42%.