1-Year Installment Loan, 8% “Add-on”

Interest = 0.08($100,000) = $8,000.

Face amount = $100,000 + $8,000 = $108,000.

Monthly payment = $108,000/12 = $9,000.

= $100,000/2 = $50,000.

Approx. cost = $8,000/$50,000 = 16.0%.

Average loan

outstanding

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