When learning about interest rates this week, what is the effective rate? Well, we see that it is calculated using fees and charges that are associated with the borrowing of the funds. Here is an example:

A promissory note states a 10% interest rate per year and matures in one year. The bank charges $75.00 in fees for the transaction. The government charges another fee of $50.00.

What is the effective interest rate on this transaction?