Microeconomics 13th Edition by Russell Sobel, David Macpherson, Richard Stroup, James Gwartney

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*A lender made the following statement to a borrower: "You are borrowing $1,000, which is to be repaid in twelve monthly installments of $100 each. Your total interest charge is $200, which means your interest rate is 20 percent." Is the effective interest rate on the loan really 20 percent? Explain.