Determine the interest that would be charged

Question

Determine the interest that would be charged on a two-week $300 payday loan if the interest rate is 520%, and the interest is compounded at the end of the two weeks.

Answer 1

Simple interest (usually for a short period of time) is calculated as

 

Principal * rate * time

 

Because the interest rate is in terms of a year, time has to be in annual terms also.

 

$400 * 5.20 * 14/265 = $59.84