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A man walks into a New York City bank and asks for a $5000

Here's an old story: A man walks into a New York City bank and asks for a $5000 loan, offering his Ferrari, worth $250,000 as collateral. He tells the loan officer that he needs the money for two weeks for an important venture. The loan officer, having the car as security and after checking references, gives the man the money he requested, with a signed agreement that he will pay the money plus $45 in interest when he returns in two weeks. The bank officer takes the car keys and the car is parked in the bank's underground lot. The man returns in exactly two weeks, pays the loan and interest, and reclaims his car. The bank
officer asked him why he was willing to pay such a high interest rate. His reply: where else can I safely park my car for two weeks in New York City for only $45?

A. What annual interest rate did the man pay?
B. How much would the man need to repay at the end of two months if he borrowed $5000 with the same rules and same annual interest rate?

Solution Preview

Here's an old story: A man walks into a New York City bank and asks for a $5000 loan, offering his Ferrari, worth $250,000 as collateral. He tells the loan officer that he needs the money for two weeks for an important venture. The loan officer, having the car as ...

Solution Summary

This solution is comprised of a detailed explanation to answer what annual interest rate did the man pay.

$2.19