Question

Suppose you wish to borrow $600 for two weeks and the amount of interest you must pay is $25 per $100 borrowed. What is the APR at which you are borrowing money

Answer 1

Answer:

The APR at which the money is borrowed, is approximately 651.79%

Step-by-step explanation:

The amount which one wishes to borrow for two weeks, P = $600

The amount of interest that one must pay back = $25 per $100 borrowed

Therefore;

The total interest on the $600 loan (borrowed) for two weeks = 25/100× $600 = $150

The number of days for which the amount was borrowed = 2 weeks = 14 days

The Annual Percentage Rate, APR is given as follows;

$APR = \left (\dfrac{\left (\dfrac{Interest \ Paid \ for \ the \ Loan \ duration}{The \ amount \ borrowed} \right )}{The \ number \ of \ days \ the \ amount \ was \ borrowed } \right ) \times 365 \times 100$

Therefore, we get

$APR = \left (\dfrac{\left (\dfrac{150}{600} \right )}{14 } \right ) \times 365 \times 100 \approx 651.79 \%$

The annual rate at which the money is borrowed, APR ≈ 651.79%.