Question

In: Finance

A house costs $143,000. It is to be paid off in exactly ten​ years, with monthly...

A house costs $143,000. It is to be paid off in exactly ten​ years, with monthly payments of $1,667.73. What is the APR of this​ loan?

A. 6.1​% B. 7.1​% C. 5.1​% D. 8.1​%

Solutions

Expert Solution

B.7.1%

APR or Annual percentage rate refers to the annual interest rate charged by the banks to the borrower of the fund.Here APR can be computed using the excel function=RATE() . The number of periods is 12*10(10 years*12 monthly payments per year) =120.the loan amount is $143,000.the monthly payment is $1,667.73 The formula is multiplied with 12 to convert the rate into an annual basis.The monthly payment is an outflow hence the negative sign is used.

The formula used=RATE(B5,-B3,B2)*12 we get APR as 7.1%


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