Question

Derek borrows $290,132.00 to buy a house. He has a 30-year mortgage with a rate of 5.93%. After making 138.00 payments, how much does he owe on the mortgage?

Answer format: Currency: Round to: 2 decimal places.

Assume a bank offers an effective annual rate of 6.14%. If compounding is monthly what is the APR?

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

A bank offers 5.00% on savings accounts. What is the effective annual rate if interest is compounded semi-annually?

Answer format: Percentage Round to: 4 decimal places (Example: 9.2434%, % sign required. Will accept decimal format rounded to 6 decimal places (ex: 0.092434))

Answer 1

1.

Calculating Monthly payment,

Using TVM Calculation,

PMT = [PV = 290,132, FV = 0, N = 360, I = 0.0593/12]

PMT = $1,726.45

Calculating Loan Balance after 138 payments,

Using TVM Calculation,

FV = [PV = 290,132, Pmt = -1,726.45, N = 138, I = 0.0593/12]

FV = $232,413.75

2.

APR(monthly) = 12[(1.0614)^1/12 - 1] = 5.9737%

3.

EAR = (1 + 0.05/2)² - 1 = 5.0625%