Question

A payday lender will loan you $200 for 14 days (out of 360), charging a "service fee” of $29. Find the annual rate of interest as a percentage. $2000 is invested at 3.5% interest compounded monthly for 20 years. Find the future value and find the interest earned, to the nearest dollar.

Answer 1

ANswer:

$\Rightarrow \ \$29=\$200\left [ \frac{APR}{100} \right ]\left [\frac{14\ DAYS}{360\ DAYS} \right ]$

$\Rightarrow\mathbf{{\color{Green} Annual\ rate\ of\ interest\ APR=373\%}}$

$Future\ value=A\left [ 1+\frac{(APR)}{100[12]} \right ]^{n}$

$A\rightarrow Amount\ invested$

n → ANo.of Monthly compoundings

$\Rightarrow FV=\$2000\left [ 1+\frac{3.5}{12\times 100} \right ]^{240}$

$\mathbf{{\color{Green} =4023.40}}$