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Evaluating Loan Offers Under New York Usury Law
Based on New York's law, which defines charging an annual interest rate over 25% as 'criminal usury', evaluate the two loan offers presented in the case study. Determine which offer is illegal and provide a justification based on a comparison of their approximate annual interest rates.
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Source: 2014 DealBook Report on New York Payday Loan Usury Charges
A resident of New York takes out a $500 loan and agrees to repay the full amount plus a $100 fee in two weeks. New York state law defines 'criminal usury' as charging an annual interest rate exceeding 25%. Which of the following statements best analyzes the legality of this loan?
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In New York, charging an annual interest rate above 25% on a loan is considered 'criminal usury'. A consumer is presented with four different short-term loan offers. Which of the following offers represents the most significant violation of this law, meaning it has the highest effective annual interest rate?