Calculate the effective annual interest rate

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Reference no: EM131970625

Llewellyn Sinclair is planning to borrow $40,000 for one year, paying interest of $2,400 to a bank at the beginning of the year (discount loan).

In addition, according to the terms of the loan, the bank requires Chad to keep 10 percent of the borrowed funds in a non-interest-bearing checking account at the bank during the life of the loan.

Calculate the effective annual interest rate.

Reference no: EM131970625

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