Question: (a) A 5-year loan of $35,000 is to be repaid in 5 annual payments of $10,000. What is the effective interest rate on this loan?
(b) If, instead, this loan were to be repaid through payments of $2,500 every 3 months for 5 years, what would be the effective interest rate?
(c) Assume that the borrower had made a deal with an intermediary to pay him a .5-percent commission (of the loan amount) if he could locate a lender who would agree to certain terms. A lender was located and the arrangement in part (a) was consummated. What was the effective interest rate to the borrower?