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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 effective rate of interest on the 12 percent discounted loan?

1. 13.6%

2. 12.0%

3. 14.1%

4. 12.5%

5. 10.7%

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Basic Finance, Finance

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