A local finance company quotes an interest rate of 17 percent on one-year loans. So, if you borrow $23,000, the interest for the year will be $3,910.

Because you must repay a total of $26,910 in one year, the finance company requires you to pay $26,910y12, or $2,242.50, per month over the next 12 months. Is the interest rate on this loan 17 percent? What rate would legally have to be quoted? What is the effective annual rate?