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How to compute what is the annual interest rate

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Reference no: EM132562402

First Question: Moneytree, a payday loan company, offers the following loan. They will give you $100 now, and in two weeks you will pay them back $115. (These are actual numbers from their website!)

Question 1: If you view this loan as a simple interest loan over time, what is the annual interest rate? How does this interest rate compare to interest rates for other loans like mortgages and credit cards?

Question 2: Why would a payday loan company charge an interest rate like that?

Question 3: Second Question: You can afford monthly payments of $2,100. Current mortgage rates are 3.52% for a 30-year fixed rate loan. You are required to make a 20% down payment and have the cash to do it. What price home can you afford?

Reference no: EM132562402

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