Compound Interest: How do I mind the APY of this problem

Compound Interest: How do I find the APY of this problem?

Hello everyone,

I am working on a compound interest homework assignment and am stuck on the following question,

Question: The Pawn Shop made a loan of $130 and was paid back $442 after 1 year. What is the APY?

Below is Here is my work and answer: I believe I did the work correct in order to get the answer by the APY seems way to high, can someone please check my work and explain to me how to set this up and solve it?

I=Prt

PV=$130
FV=442
T=1 Year

130+130x=442
-130 -130
_______________

130x = 312

312/130 equals 2.4 so x=2.4 converted to a percent would be 240%

so my answer is APY=240%

Thank you for any help on this question

JasonQuinn92 said:

Question: The Pawn Shop made a loan of $130 and was paid back $442 after 1 year. What is the APY?

Click to expand...

Holy cripes! More than three hundred bucks in interest on a hundred-thirty buck loan -- for just one year?!? Wow. :shock:

JasonQuinn92 said:

...the APY seems way to high....

Click to expand...

For a bank, yes. For a pawn-shop, maybe not.

Tip: Try to find a different source, when you need to borrow small amounts for short periods. Even cash advances on credit cards aren't this bad!

JasonQuinn92 said:

can someone please check my work and explain to me how to set this up and solve it?

I=Prt

PV=$130
FV=442
T=1 Year

Click to expand...

Are you using "T" in place of "t" in "I = Prt", or does "T" stand for something else? (Standard math notation says that "T" should be different, but I don't see it defined anywhere, is why I ask.)

JasonQuinn92 said:

130+130x=442

Click to expand...

What is "x"?

JasonQuinn92 said:

-130 -130
_______________

130x = 312

312/130 equals 2.4 so x=2.4 converted to a percent would be 240%

so my answer is APY=240%

Click to expand...

How is "APY" being defined? (Usually one uses "APR", or "annual percentage rate", which itself has multiple definitions, and "APY", or "annual percentage yield", is defined differently, is why I ask.)

Thank you!

JasonQuinn92 said:

Hello everyone,

I am working on a compound interest homework assignment and am stuck on the following question,

Question: The Pawn Shop made a loan of $130 and was paid back $442 after 1 year. What is the APY?

Below is Here is my work and answer: I believe I did the work correct in order to get the answer by the APY seems way to high, can someone please check my work and explain to me how to set this up and solve it?

I=Prt

PV=$130
FV=442
T=1 Year

130+130x=442
-130 -130
_______________

130x = 312

312/130 equals 2.4 so x=2.4 converted to a percent would be 240%

so my answer is APY=240%

Thank you for any help on this question

Click to expand...

You are correct if you are using the standard definition of APY, but that is not usually used for rates on loans.