This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $22,000 for one year. The interest rate is 12.7 percent. You and the lender agree that the interest on the loan will be 127 * $22,000 = $2,794. So the lender deducts this interest amount from the loan up front and gives you $19,206. In this case, we say that the discount is $2,794. What is the effective annual rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Effective annual rate %