Marisol is looking at a one-year loan of $15,000. The interest rate is quoted as 10 percent plus 4 points. A point on a loan is simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. The interest rate quotation in this example requires the borrower to pay 4 points to the lender up front and repay the loan later with 10 percent interest.

What rate would Marisol actually be paying here?

Multiple Choice

• 5.60%

• 14.58%

• 16.04%

• 13.12%

• 10.00%