Final answer:
The effective interest rate charged on this loan is approximately 6.5%.
Step-by-step explanation:
To calculate the effective interest rate charged on the loan, we can use the formula for the present value of an annuity. The formula is: PV = Pmt x (1 - (1 + r)^(-n)) / r, where PV is the present value of the loan, Pmt is the monthly payment, r is the interest rate per period, and n is the number of periods.
Plugging in the given values, we have: 154,900 = 1,420 x (1 - (1 + r)^(-10*12)) / r. This equation can be solved using trial and error or using a financial calculator or spreadsheet program. The effective interest rate charged on this loan is approximately 6.5%, so the correct answer is option a.