3. You want to purchase a house for $600,000 and you will need to take out...

3. You want to purchase a house for $600,000 and you will need to take out a loan for $500,000. The house has magnificent columns, tall windows and is beautifully landscaped with a lovely rose garden in the back. (Roses are your favorite!). Your biggest concern at the moment though is getting a good interest rate on your loan. The First National Bank of Barrington Hills offers you a 30-year loan making your payments $2,684.11 per month. What interest rate is the bank charging you? Please show your work.

4. If the real interest rate is 2.0% per year and the inflation rate is 1.50%, what is the approximate nominal interest rate?

Expert Solution

3)

Formulae

4)

Real Interest rate = 2% pa

Inflation rate = 1.50%

Approximate Nominal rate = Real rate + Inflation rate = 2% + 1.5% = 3.5%

jeff jeffy answered 2 years ago

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