In 1915, Albert Epstein allegedly borrowed $7,000 from a large New York bank on the condition that he would repay 7% of the loan every three months, until a total of 50 payments had been made. At the time of the 50th payment, the $7,000 loan would be completely repaid. Albert computed his annual interest rate to be [0.07($7,000) × 4]/$7,000 = 0.28 (28%). Solve, (a) What true effective annual interest rate did Albert pay? (b) What, if anything, was wrong with his calculation?

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