Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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New Hampshire is giving payday lenders the gong as it rings in the new year. A law
that takes effect today caps the interest rate on small loans at 36 percent a year, which
the industry has said will put it out of business.
Payday lenders typically charge $20 per $100 for two-week loans backed by the
borrower's car title or next paycheck. That amounts to 1.43 percent interest per day,
an annual rate of 521 percent.
The cap translates to a daily interest rate of about 0.1 percent, or total interest
charges of $1.38-a dime a day on a $100, two-week loan. [R226]
(a) What is a "payday loan"?
songe tact ci det oge
(b) Verify the computation that 1.43% interest per day is 521% interest annually.
(c) If the 1.43% daily interest is compounded daily then the true annual rate of interest
W [2]
[2] SI 0.01 20
fact much more than 521%. How much is it? of vaq asdorsm
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Transcribed Image Text:New Hampshire is giving payday lenders the gong as it rings in the new year. A law that takes effect today caps the interest rate on small loans at 36 percent a year, which the industry has said will put it out of business. Payday lenders typically charge $20 per $100 for two-week loans backed by the borrower's car title or next paycheck. That amounts to 1.43 percent interest per day, an annual rate of 521 percent. The cap translates to a daily interest rate of about 0.1 percent, or total interest charges of $1.38-a dime a day on a $100, two-week loan. [R226] (a) What is a "payday loan"? songe tact ci det oge (b) Verify the computation that 1.43% interest per day is 521% interest annually. (c) If the 1.43% daily interest is compounded daily then the true annual rate of interest W [2] [2] SI 0.01 20 fact much more than 521%. How much is it? of vaq asdorsm
Expert Solution
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Step 1

In daily life some time we need cash money very urgently and but we don't have that so due to which the payday loans are very common now days.

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