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NeedyAbusers Limited (NAL) offers $2000 loans for up to 30 days for a flat fee of 10% of the principal due at the time of lending. LoanSharkers Inc. (LSI) also offers $2000 loans. It charges $100 administrative fee at the time of lending, and interest rate of 60% per year. To make it easier for the customers LSI divides interest and principal into 52 equal weekly installments. Thus on a $2,000 loan a customer pays (2,000(1.60)/52)= $61.54 every week. What effective annual interest rate each lender is charging. Which lender would you borrow from, if you need money for one year? NeedyAbusers Limited (NAL) offers $2000 loans for up to 30 days for a flat fee of 10% of the principal due at the time of lending. LoanSharkers Inc. (LSI) also offers $2000 loans. It charges $100 administrative fee at the time of lending, and interest rate of 60% per year. To make it easier for the customers LSI divides interest and principal into 52 equal weekly installments. Thus on a $2,000 loan a customer pays (2,000(1.60)/52)= $61.54 every week. What effective annual interest rate each lender is charging. Which lender would you borrow from, if you need money for one year?
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NeedyAbusers Limited Period 30 days Loan amount 2000 10 Flat fee 2000200 1800 Future value 2000 To find interest rate we need to use hit and trial method under which we would assume two randoms intere... View the full answer
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