Question

A company offering tax refund anticipation loans is trying to draw new customers. The company guarantees that the annual percentage rate on its loans is 39%. What fees would the company charge on a $1,200 loan if the term of the loan is 18 days? (Round to the nearest dollar).

Answer 1

The correct answer is option B) $23. I just did the exam and got it right!

Answer 2

$23

Step-by-step explanation:

If the annual percentage rate is 39%, the rate on 18 days can be calculated as shown below.

(1 year) 365days = 39%

18 days = ?

let the unknown rate be represented by X

X = (18 x 39) ÷ 365

X = 1.92%

If the principal is $1,200, then the rate charged after 18 days is;

(1.92 ÷ 100) x $1,200

0.0192 x $1,200

= $23.07≈ $23 (to the nearest dollar)

Cheers.