A finance company paid a furniture retailer $1934 for a conditional sale contract requiring 12 end-of-month payments of $175. What effective rate of return does the finance company earn on the purchase?

Effective Rate

The actual rate of interest earned or paid on an investment or loan over a specified timeframe, taking into account the effect of compounding.

Finance Company

A business that provides loans to individuals or corporations, apart from traditional banks, often focusing on areas such as auto financing, personal loans, and leasing.