Problem
1. Rearden Metal has borrowed $4 million for three months at a stated annual rate of 8%, using inventory stored in a field warehouse as collateral. The warehouse charges a $10,000 fee, payable at the end of the month. Calculate the effect annual rate on this loan.
2. Luther Industries is offered a £1 million dollar loan for four months at an APR of 9%. If this loan has an origination fee of 1%, what is the effective annual rate (EAR) for this loan?