Are you APR aware? Poll results & discussion

vnice

if 3,650% is the answer why is that not one of the options?

when are we going to be told the answer?

dillydilly

they say there are more stars in the sky than there are grains of sand on the earth, so I would guess if this is the answer the interest payment would be somewhat more than £1

st8ve

"give it me back tomorrow and a pound on top",

if you pay off the loan and interest in one day then the total paid back is £11, 10% APR, it's a trick question, forget compound interest etc, you paid the loan and interest in one day...

toshkininny

If someone lent you £10 and said: "give it me back tomorrow and a pound on top",

.......... I'd tell them where to go!

MSE_Martin

Some interesting responses.

One thing to remember (especially St8ve) is APR stands for ANNUAL percentage rate

wishiwasarichgirl

but if you didn't pay your mate back the next day, but a few days later, would they want a pound extra per day, or still just the £11? That wasn't in the initial agreement (In fact, if it was a year later, would they still be expecting it back at all!) I think we need to see the small print first

Contains_Mild_Peril

wishiwasarichgirl wrote: »

I think we need to see the small print first

Best answer yet, and always the important thing with loan agreements.
Based in the information given, the equivalent APR is 3650%. Since this isn't one of the poll options, I suppose we're meant to base our answers on compound interest, but if the loan and interest are repaid in one day as agreed, that doesn't apply to this case.

craig86

You pay effective interest of 10% per day, so after 365 days you would owe:

£10 * (1 + 0.1) ^ 365 = £1.28 x 10 ^ 16

(that's £12.8 million billion!).


The APR is:

((1 + 0.1) ^ 365 - 1) * 100% = 1.28 x 10 ^ 17 per cent


(There are about 10^21 stars in the universe.)

lethal0r

interesting points. i was thinking like 1000%, would never have thought you could get so high APR from £10 in one year! just goes to show you how a salesperson could word something cleverly over the phone to make a poor APR sound good. always check the smallprint!

Biggles

Yes, I was thinking 3,650% but it's amazing the difference the compounding makes in such a simple example!