Taj obtained a $1,000 loan to be paid back at the end of 1 month. The lender quoted Taj a $200 fee. Which of the following is correct regarding this loan?

Question

Quizplus · Accepted Answer

The APR (Annual Percentage Rate) for this loan is indeed over 240%. The $200 fee on a $1,000 loan for one month, when annualized, results in an APR much higher than 240%. The calculation for APR in this scenario involves converting the monthly rate into an annual rate, which significantly exceeds 240%. Choices B and C are incorrect: Taj will receive $1,000, not $1,200, and the repayment, including the finance charge, is due at the end of 1 month, not 1 year.

Taj Obtained a $1,000 Loan to Be Paid Back at the End