determine the annual percentage rate (apr) for a tax refund anticipation loan based on the following…

determine the annual percentage rate (apr) for a tax refund anticipation loan based on the following information. (round to the nearest percent.) amount of loan = $985 total fees paid = $135 term of loan = 10 days a. 50% b. 137% c. 266% d. 500% please select the best answer from the choices provided

determine the annual percentage rate (apr) for a tax refund anticipation loan based on the following information. (round to the nearest percent.) amount of loan = $985 total fees paid = $135 term of loan = 10 days a. 50% b. 137% c. 266% d. 500% please select the best answer from the choices provided

Answer

Explanation:

Step1: Calculate daily interest rate

The interest paid is the total - fees, which is $I = 135$. The principal amount of the loan is $P=985$. The number of days of the loan is $t = 10$. The daily - interest rate $r_d$ is calculated using the simple - interest formula $I=P\times r_d\times t$. So, $r_d=\frac{I}{P\times t}=\frac{135}{985\times10}=\frac{135}{9850}\approx0.0137$.

Step2: Calculate annual percentage rate (APR)

There are 365 days in a year. The APR ($r_{APR}$) is the daily interest rate times the number of days in a year. So, $r_{APR}=r_d\times365 = 0.0137\times365\approx5$. In percentage form, $r_{APR}=500%$.

Answer:

d. 500%