What's the APR of a ‘pint to say thanks for the cash’? poll discussion

Gordon_the_Moron

daz9643 wrote: »

Of course the answer is 'none of the above'. See below,

If someone lent MARTIN £20 and said "pay me back in a week, then buy me a pint (£2.75) and we’re sorted", what’s the equivalent APR?

1. Martin would pay the money into an instant access account paying 4%.

2. He would then head down to J D Wetherspoons for a pint @ 99p.

3. He would then pay using a combination of cashback, 0% no fee credit cards while collecting loyalty points at the same time.

4. The interest he was earning would be used to pay off the £20 over the year and in 12 months time he would have made a tidy profit.

garthdp

what if he wants a pint of Stella?

Coveredinbees!!!!

I'm sure whoever your buying a pint for would buy you one back so it would be 0%

Frugaldom

teddyco wrote: »

I cannot believe 30% have voted for A?

I don't get it, if it costs £22.75 to pay back a loan of £20 (the question says pay back in one single week) and buy me a pint, as in one single pint, without stipulating when, where are all the big numbers coming from? I guess I'm just one of those stupid people who doesn't understand APR and my reasoning won't allow me to see further than the cost of clearing the entire debt, which, to me, is £20 + £2.75

omelette451

daz9643 wrote: »

2. He would then head down to J D Wetherspoons for a pint @ 99p.

I was going to say go to wetherspoons too! Even if you don't have the 99p pint you'd still get both drinks for (possibly considerably) less than a fiver.

Just out of interest, if you're reading this Martin, are you a beer or a lager man?

brightonman123

has anyone factored in the bag of nuts, and kebab afterwards??:beer: :beer:

thelawnet

This reads like a defence of those door-to-door loans. The APRs are numerically very high, but they reflect the loans' short-term high-cost nature.

Gerry_Pridham

Hi guys,

Just joined after reading the free pint poll.

If you put this formula into Excel, it will return 811.845, equivalent to 81,185% interest.

=1.1375^52

The 1.1375 is the interest for a week (£2.75 for the pint divided by the £20 loan is 13.75%). It doesn't matter that you only do this once. The question was what is the Annual Percentage Rate. To get this, since there are 52 weeks in one year, you have to obtain 1.1375 to the power of 52 (1.1375 x 1.1375 x 1.1375 fifty two times) and the operator for that calculation is "^" in Excel.

:rotfl:

blaser

Or to be a little more accurate because a year is a little more than 52 weeks!
1.1375^(365/7) = 8269.25%

BruceyBonus

Yay! I was correct. I did get a value just slightly lower than the correct answer but decided to go for the nearest anyway (probably due to rounding).