Overview
Choose one of the two following options and answer it in this discussion forum. Discuss, show work, include diagrams and formulas, make a video—tell us what you know and what you learned!
Option 1: Find the average cost of a monthly apartment or house rental in your city. Find a hotel’s average cost by week or by day. Compute the cost per month for each and compare. How much is saved each month on average by picking one option or the other? How much is saved in a year?
Option 2: In Shakespeare’s time, interest above a certain rate was considered illegal. This view was memorialized in the play The Merchant of Venice, which compared charging large interest rates to extracting a “pound of flesh.”
Yet payday loans today often charge that same interest rate or more (counting fees and all associated costs). Find a specific online offering of a payday loan or cash and compare that with a specific cash advance on a credit card; select a specific card and mention the terms or use a default credit card at 18% APR, compounded continuously.
Suppose someone needed to borrow $1,500. What would be the difference in the repayment amount if they borrowed the money through a payday loan versus a credit card cash advance? (Assume a 3% origination fee, interest charges start immediately, and an 18% APR, compounded continuously.)
What if the amount were $500 or $4,500? Does the difference get smaller or larger?
Write: Describe how you arrived at your solutions. Showcase your critical thinking skills and include supporting details to back up your conclusions.