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FinnZ [79.3K]
3 years ago
10

Friendly’s Quick Loans, Inc., offers you “seven for nine or I knock on your door.” This means you get $7.00 today and repay $9.0

0 when you get your paycheck in one week (or else). If you were brave enough to ask, what APR would Friendly’s say you were paying?
Business
1 answer:
mina [271]3 years ago
6 0

Answer: Friendly's would say that you were paying an APR of 1485.71%.


We arrive at the answer as follows

First we calculate the dollar interest on the $7 loan and the rate of interest.

Dollar interest = 9 -7 = 2

\mathbf{Rate of interest on the loan = \frac{2}{7}*100 = 28.5714 percent}

This 28.5714% interest is for a loan that lasts for one week.

Since a year has 52 weeks, we can find the APR as \mathbf{28.5714 * 52 = 1485.71 percent}.

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Darren and Nikki own a cabin in Mammoth, California. During the year, they rented it for 45 days for $9,000 and used it for 12 d
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