Problem:
You have just borrowed $20,000 to buy a new car. The loan agreement calls for 60 monthly payments of $444.89 each to begin one month from today.
Requirement:
Question: If the interest is compounded monthly, then what is the effective annual rate on this loan?
a. 12.68%
b. 14.12%
c. 12.00%
d. 13.25%
e. 15.08%
Note: Provide support for your rationale.