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    Approximate Nominal Rate of Interest

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    Coverall Carpets Inc. is planning to borrow $12,000 from the bank. The bank offers the choice of a 12 percent discount interest loan or a 10.19 percent add-on, one-year installment loan, payable in 4 equal quarterly payments. What is the approximate (nominal) rate of interest on the 10.19 percent add-on loan?

    a. 5.10%
    b. 10.19%
    c. 12.00%
    d. 20.38%
    e. 30.57%

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    Solution Summary

    The solution depicts the steps to calculate the approximate rate of interest in the given case.