Money is a rather tight this month, and so you decide to borrow $1,300 from your local loan shark, "Mr. E. Z. Loan". He is willing to lend you the $1,300 if you will repay him $1,371.50 one month later. What nominal annual interest rate are you being charged

Question

Business

Owen Thompson

Today, 04:20

Money is a rather tight this month, and so you decide to borrow $1,300 from your local loan shark, "Mr. E. Z. Loan". He is willing to lend you the $1,300 if you will repay him $1,371.50 one month later. What nominal annual interest rate are you being charged

+2

Answers (1)

Know the Answer?

Maverick Kaiser · Answer 1

Nominal Annual interest rate is 66% (assuming interest paid is simple interest)

Explanation:

Amount of loan = $1,300

Repayment value = $1,371.50

Period = 1 month

Interest payment = Repayment value - Amount of loan

Interest payment = $1,371.50 - $1,300 = $71.50

Rate of interest payment = Interest payment / loan amount = $71.5 / $1,300 = 0.055 = 5.5% per month

Yearly interest = 5.5% x 12 = 66%