Lane French had a bad credit rating and went to a local cash center. He took out a $100 loan payable in two weeks at $115.
That's too bad.
What is your question?
To determine the annual interest rate on Lane French's loan, we can use the formula for calculating the annual percentage rate (APR).
First, let's understand the loan terms:
- Loan amount: $100
- Repayment amount: $115
- Loan duration: 2 weeks
To calculate the APR, follow these steps:
Step 1: Calculate the interest charged on the loan.
Interest = Repayment amount - Loan amount
Interest = $115 - $100
Interest = $15
Step 2: Convert the loan duration into a decimal.
Loan duration in weeks = 2 weeks
Loan duration in years = 2 weeks / 52 weeks (as there are 52 weeks in a year)
Loan duration in years = 0.0384 years
Step 3: Calculate the APR.
APR = (Interest / Loan amount) / Loan duration in years
APR = ($15 / $100) / 0.0384
APR = 0.1562
Step 4: Convert the APR into a percentage.
APR = 0.1562 * 100
APR = 15.62%
Therefore, Lane French's loan has an annual interest rate (APR) of 15.62%.