Question
In: Finance
You plan to borrow $75,000 to purchase a small yacht, 2014 Maritimo X50, with financing from...
You plan to borrow $75,000 to purchase a small yacht, 2014 Maritimo X50, with financing from Capital One Bank. You can afford to make monthly payments of $1,475, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan? What is the APR on this loan? What is the EAR on this loan? Prepare an amortization schedule on the 60-month yacht loan and determine the total interest paid after 5 months
Solutions
Expert Solution
APR is calculate using RATE function in Excel :
nper = 60 (60 month loan)
pmt = -1475 (Monthly payment. This is entered with a negative sign as it is a cash outflow)
pv = 75000 (Loan amount)
The NPER calculated is the monthly rate. To get APR, we multiply by 12.
APR = 6.7143%
EAR = (1 + (APR/n))n - 1
where n = number of compounding periods per year
EAR = (1 + (6.71%/12))12 - 1
EAR = 6.9248%
Total interest paid after 5 months = $2,039
jeff jeffy answered 2 years agoRelated Solutions
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