Joe’s cash fast will loan you $500 today for a $600 payment in 2 weeks. what...

Question

Question

Joe’s cash fast will loan you $500 today for a $600 payment in 2 weeks. what is the EAR for joe’s cash fast loan?

Answer 1

Answer #1

interest for two weeks = $600-500 =.$100.

interest rate for two weeks = $100 / 500 *100 =>20% for two weeks.

an year has 52 weeks.

number of 2 week periods = 26 times

EAR = [1+interest rate per period]^number of compoundiings

now EAR = [ 1 +0.20]^26 -1

=>113.47546

=>11,347.55%.

Answer 2

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