Microeconomics 14th Edition by James Gwartney ,Richard Stroup,Russell Sobel ,David Macpherson

Exercise 15

*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.