Problem $6-71$ Calculating EAR with Add$-$On Interest $($LO$3)$

This problem illustrates a deceptive way of quoting interest rates called add$-$on interest. Imagine that you see an advertisement fo

Crazy Judy's Stereo City that reads something like this: $"$$$1,340$ Instant Credit! $17\%$ Simple Interest! Three Years to Pay! Low, Low

Monthly Payments!" You're not exactly sure what all this means and somebody has spilled ink over the APR on the loan contract, s

you ask the manager for clarification.

Judy explains that if you borrow $$1,340$ for three years at $18\%$ interest, in three years you will owe:

$$1,340{18}^3=$$$1,3401\mathrm{.}64303=$$$2,201\mathrm{.}66$

Now, Judy recognizes that coming up with $$2,201\mathrm{.}66$ all at once might be a strain, so she lets you make "low, low monthly paymer

of $$2,\frac{201\mathrm{.}66}{36}=$$$61\mathrm{.}16$ per month, even though this is extra bookkeeping work for her.

What is the APR $($monthly$)$ on this loan? $($Do not round intermediate calculations. Round the final answer to $2$ decimal places.$)$

Annual percentage rate

What is the EAR? $($Do not round intermediate calculations. Round the final answer to $2$ decimal places.$)$