Help solve using excel. Help solve using excel. Payday loan. You borrow $500 to

Question

Help solve using excel. Help solve using excel. Payday loan. You borrow $500 to buy gifts for your children. In two weeks, you need to pay $650 What would be your interest rate over that two-week period, and what would your Annual Percentage Rate be for the year? How much profit would the Payday Lender make in a year if they made that same loan with the same $500 every two weeks assuming 100% collections and money out on that original $500? If the lender had $100,000 in Capital for the entire year, and assuming 100% collections and fully loaned out, what would be the gross revenue for the lender

Explanation / Answer

(a)Interest rate over two weeks = (650-500)/500 = 30%

Interest rate (annual) : There are 52 weeks and 26 two-weeks periods

So Annual Interest = 30% * 26 = 780%

(b). They would make 150 in two weeks. In 26 two-week period, they would make : 150*26 = 3,900

Total profit in a year =$3,900

(c) For $500, the revenue is $650 *26 = 16,900 for the year. Then For $100,000 The revenues will 100,000*16,900/500 = $3,380,000

The revenues will be $3,380,000

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