Banks sometimes quote interest rates in the form of "add$-$on interest." In this case, if a one$-$year loan is quoted with a $20$ percent interest rate and you borrow $$1,000,$ then you pay back $$1,200.$ But you make these payments in monthly instalments of $$100$ each.

What is the true APR on this loan?

What is the effective annual rate on this loan? Why should you have known that the true rates must be greater than $20$ percent even before doing any calculations?