Are you APR aware? Poll results & discussion

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245

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  • vnice
    vnice Posts: 7 Forumite
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    if 3,650% is the answer why is that not one of the options?

    when are we going to be told the answer?
  • dillydilly
    dillydilly Posts: 171 Forumite
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    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
    st8ve Posts: 2 Newbie
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    "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
    toshkininny Posts: 1,189 Forumite
    First Post First Anniversary Combo Breaker
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    If someone lent you £10 and said: "give it me back tomorrow and a pound on top",

    .......... I'd tell them where to go! :D
  • MSE_Martin
    MSE_Martin Posts: 8,272 Money Saving Expert
    First Post First Anniversary Combo Breaker
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    Some interesting responses.

    One thing to remember (especially St8ve) is APR stands for ANNUAL percentage rate
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.
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  • wishiwasarichgirl
    wishiwasarichgirl Posts: 5,555 Forumite
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    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 :p
    Wiggly:heartpulsFB

  • Contains_Mild_Peril
    Contains_Mild_Peril Posts: 4,141 Forumite
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    wishiwasarichgirl wrote: »
    I think we need to see the small print first :p
    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
    craig86 Posts: 45 Forumite
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    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
    lethal0r Posts: 408 Forumite
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    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
    Biggles Posts: 8,209 Forumite
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    Yes, I was thinking 3,650% but it's amazing the difference the compounding makes in such a simple example!
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