Question

Barbara got a flat tire and does not have a spare. She needs her car for work, so she goes to a business that offers payday loans in order to get the money to buy a new tire. She borrows $75 and plans to pay it back when she gets paid in 8 days. Barbara is charged a fee of $15 and the term on her loan is 8 days. Approximately what is the annual percentage rate on her loan?
a.
228%
b.
487%
c.
913%
d.
973%


Please select the best answer from the choices provided

A
B
C
D

Answer 1

C

APR = (fee / amount) × (365 / term days) × 100% = (15/75) × (365/8) × 100% ≈ 0.2 × 45.625 × 100% ≈ 912.5% ≈ 913%.