You work for a medium$-$sized company in the financial services sector, contemplating offering a new lending product to new and existing customers. Your department was tasked with evaluating the opportunity and creating a report for the Management Team addressing your findings.

The market segment is a subset of the financially underserved population, often characterized by limited access to financial services institutions and low or no credit score information. This underserved segment includes diverse communities and individuals from various socioeconomic backgrounds who, despite their potential and aspirations, are often excluded from the financial opportunities that can help them improve their financial well$-$being. Addressing the needs of this segment is crucial for promoting financial inclusion and ensuring that everyone has an equal chance to build a more secure and prosperous future.

Part I: Market Analysis and Competition

One of the existing market players is a cash$-$advance store, providing short terms loans to individuals in need of immediate funds. They offer two products to their customers:

two$-$week loans charging a $$75$ fee for each $$1,000.$ At the end of the two$-$weeks, the customers may pay back the total outstanding loan with the added fee or sign up for a new loan $($with new fees assessed$).$

a four$-$week variation of the above loan in which you are assessed the two $$75$ fees at the beginning of the loan, and pay back weekly installments for $4$ weeks. That is$,$ for each $$1000$ borrowed, you keep $$1000-$ $$150=$ $$850$ and make weekly payments of $$250$ for the following four weeks

Analyze this competitor$$s offerings by determining the APR and EAR of each of the products above $($assume a year consists of exactly $52$ weeks$).$ What are your observations about their business model and the products they offer?