At a payday lending company, a loan of $500 will accrue interest as follows: Loan Duration Interest Owed 1 day $2.75 14 days $38.30 30 days $76.10 (a) Using the interest owed on a 1-day loan, find the equivalent annual simple interest rate for the loan. Use a 365-day year. Round answers to two decimal places. (b) Instead of borrowing from a payday lender, $500 is borrowed from a bank charging 6.5% simple interest. Find the amount of interest owed after 30 days. Use a 365-day year. $ %

At a payday lending company, a loan of $500 will accrue interest as follows: Loan Duration Interest Owed 1 day $2.75 14 days $38.30 30 days $76.10 (a) Using the interest owed on a 1-day loan, find the equivalent annual simple interest rate for the loan. Use a 365-day year. Round answers to two decimal places. (b) Instead of borrowing from a payday lender, $500 is borrowed from a bank charging 6.5% simple interest. Find the amount of interest owed after 30 days. Use a 365-day year. $ %

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

At a payday lending company, a loan of $500 will accrue interest as follows:
Loan Duration
1 day
14 days
30 days
Interest Owed
$2.75
$38.30
$76.10
(a) Using the interest owed on a 1-day loan, find the equivalent annual simple interest rate for the loan. Use a 365-day year. Round answers to two decimal places.
(b) Instead of borrowing from a payday lender, $500 is borrowed from a bank charging 6.5% simple interest. Find the amount of interest owed after 30 days. Use a 365-day year.
$
%

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