A loan of $3,000 for a new, high-end laptop computer is to be repaid in 15 end-of-month payments (starting one month from now). The monthly payments are determined as follows.
Loan principal .......................................... $3,000
Interest for 15 months at
1.5% per month ......................................... 675
Loan application fee .................................... 150
Total ...................................................... $3,825
Monthly payment = $3,825/15 = $255
What nominal and effective interest rates per year are actually being paid? Hint: Draw a cash-flow diagram from the perspective of the lender