A local finance company quotes an interest rate of 19.5 percent on one-year loans. So, if you borrow $46,000, the interest for the year will be $8,970. Because you must repay a total of $54,970 in one year, the finance company requires you to pay $54,970/12, or $4,580.83 per month over the next 12 months.
1. What would the rate legally have to be quoted as?
2. What is the effective annual rate?