Question
Imagine you are discussing a one-year loan for $25,000 with a somewhat unscrupulous lender (you need to pay off your bookie, and traditional banks frown
Imagine you are discussing a one-year loan for $25,000 with a somewhat unscrupulous lender (you need to pay off your bookie, and traditional banks frown at making this type of loan). The lender quotes you a rate of 14.9% for one year to which you agree. The lender states that in this unregulated market, the interest is paid up front, and calculates the loan interest at $25,000 x 0.149 = $3,725. He gives you $21,275 in cash, and says he expects $25,000 back in cash in one year, not a day later. What is wrong here (other than the questions of legality)?
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