Question

Based on a $400 loan amount, rank the following companies from the lowest to highest annual percentage rate (APR).

Company

Fees Charged

Term of Loan

A

$40

5 days

B

$50

12 days

C

$80

15 days

D

$100

20 days

Which option ranks the companies by lowest to highest APR?

A,B,C,D
B,D,C,A
D,B,C,A
D,C,B,A

Answer 1

Use APR ≈ (fee / loan) × (365 / days) × 100%.

A: (40/400) × (365/5) = 0.10 × 73 = 730.0%
B: (50/400) × (365/12) = 0.125 × 30.417 ≈ 380.2%
C: (80/400) × (365/15) = 0.20 × 24.333 ≈ 486.7%
D: (100/400) × (365/20) = 0.25 × 18.25 = 456.25%

Ranking lowest to highest APR: B, D, C, A.