Question

Elise took out a payday loan for $500 due in 2 weeks that charges an $80 fee. What is the periodic interest rate of the loan?

Answer 1

Answer:

1.41 %

Step-by-step explanation:

Principal amount (P) = $500

Time (T) = 2 weeks = 2 * 7 days = 14 days

Interest = $80

So,

Interest = P*T*$\frac{R}{100}$

=> 80 = 500 * 14 * $\frac{R}{100}$

=> 80 = 7000 * $\frac{R}{100}$

Flip the sides of the equation

7000 * $\frac{R}{100}$ = 80

Multiply both sides by 100

7000 * $\frac{R}{100}$ * 100 = 80 * 100

Cancel out the 100's on the top and bottom from the left side

7000 * R = 8000

Divide both sides by 7000

$\frac{7000*R}{7000}$ = $\frac{8000}{7000}$

Cancel out the 7000's on the top and bottom from the left side

R = 1.41 %

So, the periodic interest rate of the loan = 1.41 %