A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the year will be $2,800. Because you must repay a total of $22,800 in one year, the finance company requires you to pay $22,800/12, or $1,900.00, per month over the next 12 months.

a. What rate would legally have to be quoted?

b. What is the effective annual rate?