What is the effective interest rate on the libor loan

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Dr. Ruth is going to borrow $8,400 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 8 percent and LIBOR 1.3 percent less. Also assume there will be a $48 transaction fee with LIBOR (this amount must be added to the interest cost with LIBOR).

a. What is the effective interest rate on the LIBOR loan?

Reference no: EM13934914

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