You are looking at a one-year loan of $10,000. The interest rate is quoted as 12 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 12 percent interest.

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What rate would you actually be paying here?