Question

In: Finance

Calculate the annual interest rate on a $250,000 loan requiring 25 years to fully amortize with monthly payments of $2,633.06.

Calculate the annual interest rate on a $250,000 loan requiring 25 years to fully amortize with monthly payments of $2,633.06.


Solutions

Expert Solution

1. PV = 250,000

N = 25 * 12 = 300 monthly payments

PMT = -2,633.06

We input PMT with a negative sign as it is a cash outflow

FV = 0

CPT I/Y

I/Y is the interest rate per period

I/Y = 1.00% per month

Annual interest rate = 1.00% * 12

Annual interest rate = 12%


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