Calculating EAR A pawnbroker store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 7 per cent interest per week.

(a) What APR must the store report to its customers?

(b) Now suppose the store makes one-week loans at 7 per cent discount interest per week. What’s the APR now?

(c) The pawnbroker also makes one-month add-on interest loans at 7 per cent discount interest per week. Thus if you borrow €100 for one month (four weeks), the interest will be (€100 × 1.074) − 100 = €31.08. Because this is discount interest, your net loan proceeds today will be

€68.92. You must then repay the store €100 at the end of the month. To help you out, though, the store lets you pay off this €100 in instalments of €25 per week. What is the APR of this loan?