Question

Marina had an accident with her car and the repair bill came to $900. She didn't have any emergency fund money and no extra

money in her monthly budget, so she ended up borrowing from a pay-day loan company. As long as she can pay the loan back at
the end of the 30 day period she won't be charged any interest, technically. However, she did have to pay an $18 processing fee
per $100 that she borrowed.
If she were to consider the processing fee to represent interest paid in her formula, what would she discover to
be the annual interest rate she was charged on her short term loan?

Answer 1

216%

Step-by-step explanation:

Ordinary interest is computed on the basis of a 360-day year, so Marina's borrowing period is 1/12 of a year. The annual rate is then 12 times the rate Marina pays for 30 days:

12 × 18/100 = 216/100 = 216%

Marina would discover the annual interest rate is 216%.