Barbara got a flat tire and does not have a spare. She needs her car for work, so she goes to a business that offers payday loans in order to get the money to buy a new tire. She borrows $75 and plans to pay it back when she gets paid in 8 days. Barbara is charged a fee of $15 and the term on her loan is 8 days. Approximately what is the annual percentage rate on her loan?
The fee is 15 ÷ 75 = 0.20, or 20% of the amount borrowed for 8 days. Annualizing that rate gives 0.20 × (365 ÷ 8) ≈ 9.13, or about 913%. The correct choice is 913%.
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