A developer offers lots for sale at $60,000, $10,000 to be paid down and $10,000 to be paid at the end of cach of the next five years with "no interest to be charged." In discussing a possible purchase, you find that you can get the same lot for $48,959 cash. You also find that on a time purchase there will be a service charge of $2,000 at the date of purchase to cover legal and handling expenses and the like. Ap- proximately what rate of interest before income taxes will actually be paid if the lot is purchased on this time payment plan?

AppendixLO1