Finding implicit interest rates (truth-in-lending laws reduce the type of deception suggested by this problem). Friendly Loan Company advertises that it is willing to lend money for five years at the low rate of 8 percent per year. A potential borrower discovers that a fiveyear, $10,000 loan requires that the borrower pay the 8 pefcent interest in advance, with interest deducted from the loan proceeds. The borrower will collect $6,000 [= $10,000 — (= 5 X 0.08 X $10,000)] in cash and must repay the "$10,000" loan in five annual installments of $2,000, one each at the end of the next five years.

Compute the effective interest rate implied by these loan terms.