Nominal and Effective Interest Rates A car dealer offers you a “special rate loan” of 5% for 12 months on a $2000 car. The car dealer calculates your monthly payments as $2000 + (5%)($2000) = $2100/12...

Nominal and Effective Interest Rates A car dealer offers

you a “special rate loan” of 5% for 12 months on a $2000

car. The car dealer calculates your monthly payments as

$2000 + (5%)($2000) = $2100/12 = $175. Are you actually

getting a 5% per year loan? What are the nominal and effective interest rates?