Payday loans are very short-term loans that charge very high interest rates. You

Question

Payday loans are very short-term loans that charge very high interest rates. You can borrow $150 today and repay $210 in two weeks. What is the compounded annual rate implied by this 40 percent rate charged for only two weeks? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Payday loans are very short-term loans that charge very high interest rates. You can borrow $150 today and repay $210 in two weeks. What is the compounded annual rate implied by this 40 percent rate charged for only two weeks? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Explanation / Answer

Compounded annual rate=(1+rate of interest)^time period-1

Time period=(52/2)=26

=(1+0.4)^26-1

which is equal to

=629,883.14%(Approx).

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