L & M loaned Joan $400 so that she could buy her textbooks for the current semester.L & M's terms for repayment of the loan (including interest)are $200 in two months,$200 in four months,and another $100 at the end of the fifth month.The legal maximum rate of interest on this type of loan is 6 percent per annum.L & M's loan is usurious.

Question

Quizplus · Accepted Answer

Usury refers to charging excessive or illegal rates of interest on loans. In this case, L & M are charging a total of $500 ($400 principal + $100 interest) for a period of 5 months, which translates to an annual percentage rate (APR) of approximately 60%. This is significantly higher than the legal maximum rate of 6% per annum, making it a usurious loan.

L & M Loaned Joan $400 So That She Could