Payday loans are very short-term loans that charge very high interest rates. You can borrow $240 today and repay $300 in two weeks. What is the compounded annual rate implied by this 25 percent rate charged for only two weeks? (Hint: Compound the 2 - week return 26 times for the annual return.)
Payday loans are very short-term loans that charge very high interest rates. You can borrow $240 today and repay $300 in two weeks. What is the compounded annual rate implied by this 25 percent rate charged for only two weeks? (Hint: Compound the 2 - week return 26 times for the annual return.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Payday loans are very short-term loans
that charge very high interest rates. You
can borrow $240 today and repay $300 in
two weeks. What is the compounded
annual rate implied by this 25 percent rate
charged for only two weeks? (Hint:
Compound the 2-week return 26 times
for the annual return.)
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