Question

Denarea will receive a $1,043.50 paycheck in 7 days. A payday lender offers to give her cash today for this check for a fee 1 12 % of the check amount. Find (a) the amount of the fee, (b) the

amount she will receive, (c) the equivalent simple discount rate, and (d) the equivalent simple interest rate

Answer 1

Amount of paycheck=$1043.50

Fee=1.12% of amount of paycheck amount

Fee=0.0112*1043.50= 11.6872 =$11.69

Amount of fee

$      11.69

(b) Amount she will receive=1043.50-11.69=     1,031.8128

Amount she will receive

$ 1,031.81

(c) Equivalent simple discount rate=1-(1031.81/1043.50)= 0.011202683

Equivalent simple discount rate=1.12%

(d)Equivalent simple interest rate=Interest of $11.2 on $1043.50 for 7 days

Amount of interest in a year= 1.12*(365/7)= 58.4%

Equivalent Simple interest rate

58.4%