Question

Determine the annual percentage rate (APR) for a tax refund anticipation loan based on the following information. (Round to the nearest percent.)
amount of loan = $985
total fees paid = $135
term of loan = 10 days
a.
50%
b.
137%
c.
266%
d.
500%

Answer 1

Answer:

The correct answer is D. 500%

Step-by-step explanation:

Amount of Loan = $985

Total fees paid = $135

Term of loan = 10 days

• First divide the amount of loan by total fees paid :

$=\frac{985}{135}\\\\=0.137$

• Now, multiply the result by 365 :

= 0.137 × 365

=  50.03

• Divide the result obtained by term of loan that is 10 days :

$=\frac{50.03}{10}\\\\=5.003$

• Now, multiply this by 100 to get the final APR :

= 5.003 × 100

= 500%

Hence, The correct answer is D. 500%