Use Excel, show process / steps when necessary
On a visit to his hometown, MBA candidate Ted runs into a pal from high school, walking into a payday loan outlet to get a 1-month loan. He tells Ted that the rate is only 20%. Ted recalls learning about APR and even remembers the formula for EAR is (1 + r)^n-1. He wants to warn his friend. What is the APR and the EAR of his friend’s loan? What is the flaw in the friend’s logic?