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You are looking at a one-year loan of $10,000. The interest rate is quoted as 9.8 percent plus 2 points. A point on a loan

You are looking at a one-year loan of $10,000. The interest rate is quoted as 9.8 percent plus 2 points. A point on a loan is 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 2 points to the lender up front and repay the loan later with 9.8 percent interest. What rate would you actually be paying here?

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