Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year loan is quoted with an interest rate of 8.0% and you borrow $1,000, then you pay back $1,080.  You make these payments in monthly instalments of $108 each. 1) What is the true APR on this loan? 2) What is the EAR on the loan?

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A: Loan Amount borrowed= $1,000 Monthly payment = $108 Time period = 12 months

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