Calculus

You are expecting a tax refund of $4,000 in 4 weeks. A tax preparer offers you an "interest-free" loan of $4,000 for a fee of $50 to be repaid by your refund check when it arrives in 4 weeks. Thinking of the fee as interest, what simple interest rate would you be paying on this loan?

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  1. let the rate be r

    4000(r)(4/52) = 50
    r = 50(52)/((4000)(4))
    = .165 or 16.5%

    There are actual companies dealing in paycheck-bridge loans that are charging $10 per week for a $200 quick "paycheck loan"
    that is a rate of ...
    200(r)(1/52) = 10
    r = 10(52)/200 = 2.6 or 260%

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