Question

Janet took a $3000 loan from an online lending platform. The platform charges a "processing fee" of $400 and only pays Janet $2600 right now. Janet needs to pay back the $3000 debt in 3 monthly installments （equal amount). What is the implied interest rate (in terms of APR) for this loan?

Answer 1

use present value of money or loan equation as follows

PV=CF1/(1+r)^1+CF1/(1+r)^2+CF1/(1+r)^3

2600=1000/(1+r)^1+1000/(1+r)^2+1000/(1+r)^3

use trial and error method to find r

using many values of r, we get r=7.5111% which is per month rate

What is the implied interest rate (in terms of APR) for this loan

=monthly rate*number of months per annum

=7.5111%*12

=90.13%

the above is answer..