|
|
|
|
|
|
by yummyfajitas
4917 days ago
|
|
|
It's also important to note the role of short terms here. Consider a 2 week loan with a 10% chance of default. You need to charge an 11% risk premium to break even. Translating that 11% risk premium into an APR yields 1400%. A 1 year loan with the same default probability would have only an 11% APR. So it's both fixed costs and division by short durations which make the APR seem ridiculously high. |
|
|