A payday loan company charges a $45 fee for a $550 payday loan that will be repaid in 18 days. Treating the fee as interest paid, what is the equivalent annual interest rate? Round your answer to the nearest hundredth of a percent.

A payday loan company charges a $45 fee for a $550 payday loan that will be repaid in 18 days. Treating the fee as interest paid, what is the equivalent annual interest rate? Round your answer to the nearest hundredth of a percent.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 61P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

A payday loan company charges a $45 fee for a $550 payday loan that will be repaid in 18 days.

Treating the fee as interest paid, what is the equivalent annual interest rate?
Round your answer to the nearest hundredth of a percent.

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