What is the annual effective interest rate

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Reference no: EM13739530

Benny decides to buy living room furniture worth $3000. He plans to finance the furniture for two years. The furniture store tells him that the interest rate is only 1%/mo/mo and his monthly payment is computed as follows:

Interest: 24*(.01)*($3,000) = $720

Loan Processing Fee = $86

Total Amount owed: $3,000 + 720 + 86 = $3806

Payment: $3806/24 = $158.58.

What is the annual effective interest rate that Benny is paying for the loan?

Reference no: EM13739530

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