SOLUTION: A payday loan company charges a $80 fee for a $550 payday loan that will be repaid in 11 days. Treating the fee as interest paid, what is the equivalent annual interest rate?

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Question 1174311: A payday loan company charges a $80 fee for a $550 payday loan that will be repaid in 11 days.
Treating the fee as interest paid, what is the equivalent annual interest rate?
% interest Round to the nearest percent. This will be over 100%

Answer by ankor@dixie-net.com(22740) About Me  (Show Source):
You can put this solution on YOUR website!
A payday loan company charges a $80 fee for a $550 payday loan that will be repaid in 11 days.
Treating the fee as interest paid, what is the equivalent annual interest rate?
% interest Round to the nearest percent. This will be over 100%
:
365%2F11 * 80 = $2654.55 annual interest
:
Interest = principal * rate
2654.55 = 550 * r
r = 2654.55%2F550 * 100
r = 483% annual interest rate. What a rip-off!!