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What is the annual percentage rate on this loan

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Reference no: EM133028841

Question - You need a quick $600 to pay this month's cell phone bill. An Indianapolis "payday" loan company will lend you that amount for two weeks, charging you a fee of "only" $40 (meaning you pay back $640 in 14 days). The fee will be due on the day you pay off the loan. Recognizing that the fee is in reality the interest payment, please answer the following two questions. Assume 365 days in a year.

a) What is the Annual Percentage Rate (APR) on this loan if you assume daily compounding?

b) What is the effective annual rate (EAR) on this loan?

Reference no: EM133028841

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