If the loan in Problem 22 is paid off at the end of the thirtieth month (at the time of the 30th payment) what effect does this have on the effective annual interest rate?
In Problem 22, the bank charges $500 for closing costs on a $17,000 loan with an annual percentage rate of 11% compounded monthly with a term of five years. The bank will not allow the closing costs to be added to the $17,000 borrowed. What effect do the closing costs have on the effective annual interest rate?