What is the actual effective interest rate on a $500 loan

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A bank offers a personal loan called "The Eight Per Cent Plan." The bank adds 8% to the amount borrowed; the borrower pays back 1/12 of this total at the end of each month for a year. On a loan of $500, the monthly payment is 540/12 = $45. There is also an administrative fee of $45, payable now. What is the actual effective interest rate on a $500 loan?

Reference no: EM131355793

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