Friendly’s Quick Loans, Inc., offers you $5.25 today but you must repay $6.55 when you get your paycheck in one week (or else). a.What is the effective annual return Friendly’s earns on this lending business? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b.If you were brave enough to ask, what APR would Friendly’s say you were paying? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The given question can be solved using RATE function in excel. RATE function computes interest rate…

Answered: Friendly’s Quick Loans, Inc., offers…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...

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Friendly’s Quick Loans, Inc., offers you $5.25 today but you must repay $6.55 when you get your paycheck in one week (or else).

a.	What is the effective annual return Friendly’s earns on this lending business? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.	If you were brave enough to ask, what APR would Friendly’s say you were paying? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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