Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A check-cashing store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 6.8 percent interest per
A check-cashing store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 6.8 percent interest per week. a. What APR must the store report to its customers? What EAR are customers actually paying? (Round your answers to 2 decimal places, (e.g., 32.16)) b. Now suppose the store makes one-week loans at 6.8 percent discount interest per week. What's the APR now? The EAR? (Round your answers to 2 decimal places, (e.g., 32.16)) c. The check-cashing store also makes one-month add-on interest loans at 6.8 percent discount interest per week. Thus if you borrow exist220 for one month (four weeks), the interest will be (exist220 times 1.068^4) - 220 = exist66.23. Because this is discount interest, your net loan proceeds today will be exist153.77. You must then repay the store exist220 at the end of the month. To help you out, though, the store lets you pay off this exist220 in installments of exist55 per week. What is the APR of this loan? What is the EAR? (Round your answers to 2 decimal places, (e.g., 32.16))
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started