Benny decides to buy living room furniture worth $3000. He plans to finance the furniture for two years. The furniture store tells him that the interest rate is only 1%/mo/mo and his monthly payment is computed as follows:
Interest: 24*(.01)*($3,000) = $720
Loan Processing Fee = $86
Total Amount owed: $3,000 + 720 + 86 = $3806
Payment: $3806/24 = $158.58.
What is the annual effective interest rate that Benny is paying for the loan?