Essay
Some home loans involve "points," which are fees charged by the lender.Each point charged means that the borrower must pay 1 percent of the loan amount as a fee.For example, if 0.5 point is charged on a $100,000 loan, the loan repayment schedule is calculated on the $100,000 loan, but the net amount the borrower receives is only $99,500.What is the effective annual interest rate charged on such a loan, assuming that loan repayment occurs over 360 months, and that the interest rate is 1 percent per month?
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