In: Finance
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%
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%