A person borrows $200 from a payday loan company and pays $10 interest for two weeks.This would result in an annual interest rate of approximately ________.Ignore compounding.

Question

Quizplus · Accepted Answer

The borrower paid $10 interest for two weeks, which means they would pay $20 interest for a month (since there are 4 weeks in a month). This would amount to an annual interest rate of ($20/$200) * 12 = 120%. However, since the question asks for an approximation, and the exact number is slightly above 120%, the closest answer choice is B) 130%.

A Person Borrows $200 from a Payday Loan Company and Pays