Calculating EAR A local finance company quotes a 15 percent interest rate on one- year loans. So, if you borrow $26,000, the interest for the year will be $3,900. Because you must repay a total of $29,900 in one year, the finance company requires you to pay $29,900/12, or $2,491.67, per month over the next 12 months. Is this a 15 percent loan? What rate would legally have to be quoted? What is the effective annual rate?
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