A payday lender makes a loan to a customer. The customer is given $200 today and

Question

A payday lender makes a loan to a customer. The customer is given $200 today and she must repay $230 in two weeks to the lender. What rate must be quoted to the customer?

A) 10%

B) 11%

C) 290%

D) 260%

E) 391%

An investment banker agrees to a firm commitment offering of 1.2 million shares of Bally stock. The offer price is set at $25 and the spread is 30 cents per share. If the stock is actually sold to the public at $26,000, what is the amount of funds Bally receives?

A) 31,200,000

B) 30,600,000

C) 30,240,000

D) 29,640,000

E) 28,120,000

Explanation / Answer

Interest rate quote:

= (Interest÷Loan)×(365÷14)

= ($30÷$200)×(365÷14)

= 391%

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