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The end of the month has arrived and Marina was only able to save up $150...

The end of the month has arrived and Marina was only able to save up $150 to pay off her pay-day loan of $900. This means she will have to delay payment on the remaining $750. Besides the delayed payment fee that she is charged, she will now have to pay interest on the remaining amount. The APR (annual percentage rate) is 47%, but the interest is compounded daily.

What is the effective interest rate that Marina will actually be paying?

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Answer #1

Effective Rate of Interest

Given:-

APR is 47% Per annum but interest is compounded daily basis

Daily Interest rate would be 47%/365=0.00128767123287671 per day

This assume that 365 days in a year, which is standard assumption

Amount that Marina be paying =750*(1+0.00128767123287671)^30 days

solve it and get 225.2897 interest amount that marina will paying.

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