You are looking at a one-year loan of $15,000. The interest rate is quoted as 11 percent plus 3 points. A point on a loan is simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. The interest rate quotation in this example requires the borrower to pay 3 points to the lender upfront and repay the loan later with 11 percent interest. What rate would you actually be paying here?

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The amount has to be paid in future that is one year is the principal amount plus interest ... View the full answer