Question

Some of the most common (and most dangerous) examples of simple interest are short-term payday loans, which some lenders also call "cash advances". (This is not to be confused with a cash advance on a credit card.) Let's say that you're going to get paid in ten days, and you need some cash for a car repair now. A payday lender might lend you $360 now, and you'll be asked to pay them back when your paycheck comes. Of course, you'll have to pay interest. The median fee charged by these types of lenders is $15 per every $100 borrowed. How much would you have to pay back in ten days?

Answer 1

From the question we have the following information available;

`\begin{gathered} \text{ Principal amount}=360 \\ \text{Interest}=15\%\text{ (\$15 per \$100, or }(15)/(100)) \end{gathered}`

Therefore, if you borrowed a sum of $360 as a short term cash advance based on the given repayment terms, your repayment after 10 days would be;

`\begin{gathered} \text{ Repayment}=\text{ Principal x interest} \\ \text{ Repayment}=360*15\% \\ \text{ Repayment}=360*0.15 \\ \text{ Repayment}=54 \end{gathered}`

The interest to be repaid is $54.

This means the loan repayment would be;

`\begin{gathered} \text{ Repayment}=\text{ Principal+Interest } \\ \text{ Repayment}=360+54 \\ \text{ Repayment}=414 \end{gathered}`

ANSWER:

You would have to pay back $414