Many tax preparation firms offer their clients a refund anticipation loan (RAL). For a fee, the firm will give a client his refund when the return is filed. The loan is repaid when the Internal Revenue Service sends the refund directly to the firm. Thus, the RAL fee is equivalent to the interest charge for a loan. The schedule in the table on the right is from a major RAL lender. Use this schedule to find the annual rate of interest for a $4,321 RAL, which is paid back in 30 days. RAL Amount $0-$500 $501-$1,000 $1,000-$1,500 $1,501-$2,000 $2,001 - $5,000 (Assume a 360-day year.) RAL Fe $29.00 $39.00 $49.00 $69.00 $89.00
Many tax preparation firms offer their clients a refund anticipation loan (RAL). For a fee, the firm will give a client his refund when the return is filed. The loan is repaid when the Internal Revenue Service sends the refund directly to the firm. Thus, the RAL fee is equivalent to the interest charge for a loan. The schedule in the table on the right is from a major RAL lender. Use this schedule to find the annual rate of interest for a $4,321 RAL, which is paid back in 30 days. RAL Amount $0-$500 $501-$1,000 $1,000-$1,500 $1,501-$2,000 $2,001 - $5,000 (Assume a 360-day year.) RAL Fe $29.00 $39.00 $49.00 $69.00 $89.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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m1.
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Accounting
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Many tax preparation firms offer their clients a refund anticipation
loan (RAL). For a fee, the firm will give a client his refund when the return is
filed. The loan is repaid when the Internal Revenue Service sends the
refund directly to the firm. Thus, the RAL fee is equivalent to the interest
charge for a loan. The schedule in the table on the right is from a major
RAL lender. Use this schedule to find the annual rate of interest for a
$4,321 RAL, which is paid back in 30 days.
What is the annual rate of interest for this loan?
% (Round to three decimal places.)
RAL Amount
$0-$500
$501 - $1,000
$1,000 - $1,500
$1,501-$2,000
$2,001 - $5,000
(Assume a 360-day year.)
RAL Fee
$29.00
$39.00
$49.00
$69.00
$89.00
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