Annual interest rate

Question

If you paid 89 to a loan company for the use of 1521 for 56 days what annual rate of interest did they charge? Assume 360 day year.

Answer 1

Let's find first that if you paid $89 for 56 days, how much would you pay for 360 days.This is a ratio problem.

$89 for 56 days, 89 * 360

x for 360 days x = --------------- = 572.14 $572.14 would be a yearly charge.

56

Then find that the 572.14 is how many percent of 1521.

p = 572.14 ÷ 1521 = 0.376

The interest was 37.6% which is extremely high. (could be a pay day loan)