If the e-z loans company loans $1500 in exchange for one payment of $2,000 one year from now then the APR on this loan is 33.33%
APR is an abbreviation of the annual percentage rate which can be described as the yearly interest produced by a sum that's charged to the debtor or borrower.
The annual percentage rate (APR) can be calculated by using the formula of future value as follows;
Future value = PV (1 + APR)^n
Where PV represents the present value which is $1500 and n represents the number of periods interest held which is one year in this case.
Therefore;
2000 = 1500 (1 + APR)^1
2000 = 1500 (1 + APR)
2000 = 1500 + 1500(APR)
2000 - 1500 = 1500(APR)
500 = 1500(APR)
APR = 500 / 1500
APR = 0.3333 = 0.3333 × 100 = 33.33%
Hence, the APR on this loan is calculated to be 33.33%.
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