The approximate effective interest rate of the loan is C. 43%
Explanation:
Josh took out a payday loan for $1300 that charged a $75 fee. If the loan matures in 2 weeks
[tex]1300* x = 75\\x = \frac{75}{1300} \\ x = 0.057\\x = 5.7%[/tex]
[tex]r = 10% - 5.7%= 4.3%[/tex]
Interest rate is the amount of interest due per period as a proportion of the amount lent, deposited or borrowed. Other names of effective interest rate is Yield (y), (Internal) Rate of Return (IRR). Yield definition is to bear or bring forth as a natural product especially as a result of cultivation. The yield on a security is the cash amount that returns to the owners of the security, in the form of interest or dividends received from it.
The internal rate of return is a measure of an investment’s rate of return. Internal rate of return (IRR) is the interest rate where the net present value of all the cash flows both positive and negative from a project or investment is equal zero.
[tex]y = (1 + \frac{r}{n} )^n - 1[/tex]
[tex]y = (1 + \frac{0.043}{24} )^{24} - 1[/tex]
[tex]y = 4.390%[/tex]
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