Friendlys quick loans, inc., offers you $4.00 for $5.00 or i knock on your door. this means you get $4.00 today and repay $5.00 when you get your paycheck in one week (or else). if you were brave enough to ask, what apr would friendlys say you were paying

Question

Business

Lydon

12 September, 08:25

Friendlys quick loans, inc., offers you $4.00 for $5.00 or i knock on your door. this means you get $4.00 today and repay $5.00 when you get your paycheck in one week (or else). if you were brave enough to ask, what apr would friendlys say you were paying

+1

Answers (1)

Know the Answer?

Conductor · Answer 1

Here we are trying to find the interest rate when we know the PV and FV.

Using the FV equation:

FV = PV (1 + r)

$5 = $4 (1 + r)

r = 5/4 - 1

= 25% per week

The interest rate is 25% per week.

To find the APR, we multiply this rate by the number of weeks in a year, so:

APR = (52) x 25%

= 1300%