You wish to insure your Ferrari. Mooncorp Insurance has quoted you an annual premium to insure your car of $12915. You are offered a 10% discount if you pay the lump sum immediately. They also offer an alternative payment method. You can pay the account in full by making 11 equal end-of-the month payments of $1160, rather than the lump sum, with no payment in the first month (ie the first payment is at the end of the second month followed by ten further monthly payments). What is the effective annual opportunity cost of paying monthly?
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