On 1 January 20×8, a borrower arranged a $1,110,000 three-year 3% bond payable, with interest paid annually each 31 December. There was an upfront fee of $89,011, which was deducted from the cash proceeds of the loan on 1 January 20X8. (PV of $1, PVA of $1, and PVAD of $1.)

a. Calculate the effective interest rate associated with the loan.