Question
A check-cashing store is in the business of making personal loans to walk-up customers. The store makes only one-week loans at 6.6 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 6.6 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)) Annual percentage rate 390 % Effective annual rate % b. Now suppose the store makes one-week loans at 6.6 percent discount interest per week. Whats the APR now? The EAR? (Round your answers to 2 decimal places. (e.g., 32.16)) Annual percentage rate % Effective annual rate % c. The check-cashing store also makes one-month add-on interest loans at 6.6 percent discount interest per week. Thus if you borrow $180 for one month (four weeks),the interest will be ($180 1.0664 ) 180 = $52.43. Because this is discount interest, your net loan proceeds today will be $127.57. You must then repay the store $180 at the end of the month. To help you out, though, the store lets you pay off this $180 in installments of $45 per week. What is the APR of this loan? What is the EAR? (Round your answers to 2 decimal places. (e.g., 32.16)) Annual percentage rate % Effective annual rate %
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