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You're about to buy a new car for $10,000. The dealer offers you a one-year loan where you pay $866.19 every month for the next

You're about to buy a new car for $10,000. The dealer offers you a one-year loan where you pay $866.19 every month for the next 12 months. Since you pay $866.19 * 12 = $10,394 in total, the dealer claims that the loan's annual interest rate is (10,394-10,000)/10,000 = 3.943%.

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