A new engineering graduate who started a consulting business borrowed money for 1 year to furnish the

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A new engineering graduate who started a consulting business borrowed money for 1 year to furnish the office. The amount of the loan was $23,800, and it had an interest rate of 10% per year. However, because the new graduate had not built up a credit history, the bank made him buy loan-default insurance that cost 5% of the loan amount. In addition, the bank charged a loan setup fee of $300.

What was the effective interest rate the engineer paid for the loan?


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Engineering economy

ISBN: 978-0073376301

7th Edition

Authors: Leland Blank, Anthony Tarquin

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