SOLUTION: A payday loan company charges a $90 fee for a $400 payday loan that will be repaid in 16 days. Treating the fee as interest paid, what is the equivalent annual interest rate?

Algebra ->  Percentage-and-ratio-word-problems -> SOLUTION: A payday loan company charges a $90 fee for a $400 payday loan that will be repaid in 16 days. Treating the fee as interest paid, what is the equivalent annual interest rate?       Log On


   

Question 1146643: A payday loan company charges a $90 fee for a $400 payday loan that will be repaid in 16 days.
Treating the fee as interest paid, what is the equivalent annual interest rate?
Found 2 solutions by josmiceli, richwmiller:
Answer by josmiceli(19441) About Me  (Show Source):
You can put this solution on YOUR website!
The fee per day its:
+90%2F16+=+5.625+ dollars/day
This is +5.625%2A365+=+2053.125+ dollars/yr
The annual interest rate would be
+2053.125%2F400+=+5.1328+
513.28 % annual rate
--------------------------
definitely get another opinion.
check the math, too


Answer by richwmiller(17219) About Me  (Show Source):
You can put this solution on YOUR website!
Now you should be wise enough never to go for a payday loan.