A person borrows $370 from a payday loan company, paying $26 interest for two weeks. This would result in an annual interest rate of approximately ___ percent. Ignore interest rate compounding.

Rate = 168.65%

Explanation:

When loans are collected there is interest that is paid on the principal collected. The interest is usually expressed as a percentage per year.

The following formula is used to calculate interest rate

Interest = principal * rate * time

We are asked to calculate annual percentage

Rate = interest / (principal * time)

Interest bis paid every two weeks. That is twice a month, and there are 12 months in a years. That is 2*12 = 24 times.

Total interest per year = 24 * 26 = $624

Using the formula

Rate = 624 / (370*1)

Rate = 1.6865

Rate = 168.65%