Rick needs an advance on his $600 bi-weekly paycheck. He goes to Cash King where he writes them a check for $690 and dates the check two weeks from today. The cost of financing Rick's payday loan is

Question

Quizplus · Accepted Answer

The cost of financing Rick's payday loan is calculated as follows: The finance charge is $690 - $600 = $90. Since the loan term is 2 weeks, to annualize the interest rate, we multiply the finance charge by the number of 2-week periods in a year (26), resulting in ($90 * 26) / $600 = 3.9 or 390%. Rounded to the nearest whole number, this is 391%.

Rick Needs an Advance on His $600 Bi-Weekly Paycheck