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Mr. Jack is considering a home equity loan, but he needs to know the real cost of borrowing in the following case. A home equity loan is advertised at three percent compounded quarterly, however, there is a legal fee of $850 and an appraisal fee of $650 to set up the house as collateral. If Mr. Jack needs to borrow $35,800 for one year, at which time will be able to repay the full amount, what is the effective rate of borrowing the $35,800 for the year?