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 $250 today and repay $300 in two weeks. What is the compounded annual rate implied by this 20 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 $250 today and repay $300 in two weeks. What is the compounded annual rate implied by this 20 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 + r)^26 - 1

Total 2 weeks in year = 26

compounded annual rate = (1 + 0.20)^26 - 1

compounded annual rate = 11347.55%

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