Calculate Profit of 4-Month Loan at 30% APR

Q: Calculate Profit of 4-Month Loan at 30% APR

This question evaluates a data scientist's understanding of basic financial mathematics, specifically the application of simple interest and annual percentage rate to a short-term loan.

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Question

Credit Risk — Short-term Personal Loan Profitability

Context

You are evaluating the profit on a simple-interest personal loan. Assume no compounding, inflation, opportunity cost, fees, defaults, or servicing expenses. The principal remains outstanding for the full term and is repaid at maturity.

Question

What is the profit on a 4-month loan with principal $1,000 and a 30% APR under these assumptions?

Calculate Profit of 4-Month Loan at 30% APR

Credit Risk — Short-term Personal Loan Profitability

Context

Question

Solution

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