How is the interest rate on a payday loan calculated?

To find the loan’s fee rate for its term, divide the total fees by the amount borrowed. For example, a $15 fee on a $100 loan is $15 ÷ $100 = 0.15, or 15%. Choice C, total fees divided by loan amount, gives this rate; calculating an annual percentage rate would also account for how many days the loan lasts.

AI-written and checked against the verified answer.