Question

Taylor Whitney it's a word problem A payday loan company charges a $25 fee for a $700 payday loan that will be repaid in 12 days. Treating the fee as interest paid, what is the equivalent annual interest rate.

Answer 1

Explanation:

Using I = (PRt)/100

Ratio of fee and principal amount = fee/amount

= 25/700

= 1/28

Fee(interest) for 12 days = $25

In 1 day,

= (1/28) * 1/12

= 1/336

For a year, that is 365 days

Fee (interest) = 365 * (1/336)

= 1.08 * 100

= 108 %