Many tax preparation firms offer their clients a refund anticipation loan. (RAL) For a fee, the firm will give a client his refund is filed. The loan is repaid when the Internal Revenue Service sends the refund directly to the firm. Thus, the RAL fee is equivalent to the interest charge for a loan. The schedule in the table below is from a major RAL lender. Use this schedule to find the annual rate of interest for a $4,258 RAL, which is paid back in 32 days.
What is the annual rate for this loan? __% (round to three decimal places
RAL Amount RAL Fee
$0 - $500 $29.00
$501 - $1,000 $39.00
$1,000 to $1,500 $49.00
$2,001 - $5,000 $89.00
Assume a 360 day year.
OK, the amount of $4,258 will fall into the $2,001 -- $5,000 range, so the fee will be $89.
This fee is the ...
The annual rate for this loan is clarified.