You are looking at a loan of $15,000 for one year to renovate your apartment. The interest rate on the loan is quoted as 10 percent plus two points. The interest rate quotation in this example requires the borrower to pay two points to the lender up front and repay the loan later with 10 percent interest. (Remember, A point on a loan is 1 percent (one percentage point) of the loan amount.)

What rate are you actually paying on the loan?