Compound Frequency - Payday loans are very short-term loans that charge very high interest rates. You can borrow $1,500 today and repay $1,770 in two weeks. What is the compound annual rate implied by this 18 percent rate charged for only two weeks?
Effective Annual Rate:
The effective annual rate of return on a loan can be found by using this expression: Annual rate = (1 + Periodic rate)Periods - 1. In general, the higher the number of compounding periods, the higher the effective annual rate.
Answer and Explanation:
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from Business 110: Business MathChapter 7 / Lesson 6