After Charlie Harper passed away, his brother Alan and Alan’s son Jake had to move out...

After Charlie Harper passed away, his brother Alan and Alan’s son Jake had to move out of Charlie’s beach house in Malibu where they had lived for so many years. Alan has just purchased a new apartment and financed this purchase with a 30-year mortgage that requires a 20% down payment. The rest is to be repaid in equal QUARTERLY installments of $2,200 each. The EAR on this mortgage is 6.5%, and the interest rate is compounded QUARTERLY. For accuracy, please retain three digits after the decimal point in interest rate computations in this problem (for example 5.123%).

a) What was the price of the apartment?

1 b) Suppose that Alan’s lender has to disclose the APR on this mortgage. What APR would the lender quote?

c) Based on the APR that you found in (b), which compounding frequency – daily (assuming 365 days), monthly, quarterly, semi-annual, or annual – would result in the highest EAR? Please find this EAR.

Expert Solution

A	Loan	X amount
	Interest rate	6.5% pa	Quaterly 1.625%
	Installment Quaterly	2200
	Price of Apartment= ((x)/80)*100
	Loan amount= Qtrly installment* PVAF(1.625%, 120 Qtr)
	=2200*52.645	115819

	Price of apartment= 115819/.8	144773.8
	Total interst paid= 2200*120-115819	148181

B	APR=(Interest / Loan Amount)*365/ No. of days

	=(148181/115819)*(365/10950)
	4.26

C	Monthly= e^(.0426/365)^365 Working Finding out the value of e using calculator e=2.7183==> Sqrt 12 times==> 1.00024417206 e^{_{(0.0426/365)=}}_{.(.00024417206 x .1)+1 ===> Press (x &=) 12 times = 1.04352}	4.352%	Highest EAR Daily compounding
	Quaterly= (1.010651.010651.01065*1.01065)-1	4.328%
	Semi Annualy= (1.0213*1.0213)-1	4.305%
	Annualy	4.26%

jeff jeffy answered 1 year ago

4. John is a 16-year-old who loves to play soccer. His 18-year-old brother, Andre, passed out...

4. John is a 16-year-old who loves to play soccer. His 18-year-old brother, Andre, passed out while playing basketball and has now been diagnosed with long QT syndrome (LQT1). The cardiologist involved suggests that all Andre’s siblings should have a cardiac examination, including an electrocardiogram (ECG), before they play sports. John’s ECG shows a borderline QT prolongation during activity, so the cardiologist recommends genetic testing. John tests positive for the same mutation in the gene KCNQ1 (LQT1) that Andre has,...

Ben is living in Kuala Lumpur with his 10 years old son. His wife has passed...

Ben is living in Kuala Lumpur with his 10 years old son. His wife has passed away a few years ago. His loss has alerted him on the importance of obtaining a risk management plan, especially for those dependent caused by premature death. Taking care of his son’s financial well-being has become his top priority. When his wife passed away, Ben has to face all the financial pressure especially medical treatment spent. The insurance claim of RM30,000 from his wife...

1. Charlie had taken out a personal loan of 50K in the beginning of the year...

1. Charlie had taken out a personal loan of 50K in the beginning of the year with a co-signer. He promised his co-signer that he could make the money back in no time. He showed his co-signer the payments he planned to make with interest included. He and the bank agreed that he would pay 11% interest over 48 months. This means that the loan will actually amount to $55,500 and Charlie is paying $1,156.25 monthly. a) How would you...

Your brother and his wife just had a baby and they are wondering when their baby...

Your brother and his wife just had a baby and they are wondering when their baby will begin talking. They hope soon, and they have begun saying "mama" and "dada" to their baby. What can you tell them about the course of language development during the first year of life?

After 4 years of hard work, 23 - year old Jake graduated with his bachelor’s degree...

After 4 years of hard work, 23 - year old Jake graduated with his bachelor’s degree in finance and started job hunting. After several interviews, he has secured two job offers: Offer from RBC: In the offer from RBC, the starting annual salary is $65,000 and RBC promises that Jake can expect 2.5% annual salary growth. Offer from TD Bank: In the offer from TD Bank, the starting annual salary is $70,000 and TD promises that Jake can expect 1.5%...

Three weeks after Abed died, his brother Tony properly received Abed's last paycheck from his employer....

Three weeks after Abed died, his brother Tony properly received Abed's last paycheck from his employer. The gross amount of the check was $4,000, and a $300 deduction for state income taxes was subtracted in computing the net amount of the payment. Which of the following statements about the $300 is true? a.It is deductible on both Tony's income tax return and on Abed's estate tax return. b.It is deductible on neither Tony's income tax return nor on Abed's estate...

Explain how an investor may demand a higher premium to move out of his or her...

Explain how an investor may demand a higher premium to move out of his or her preferred habitat. Can you think of examples where this premium rises as the term-to-maturity falls? Explain.

Helene Maxwell was a 65-year-old woman who lived alone. Her husband had passed away 12 years...

Helene Maxwell was a 65-year-old woman who lived alone. Her husband had passed away 12 years ago after an automobile accident, and she had one daughter, who was actively serving in the military overseas, stationed in Iraq. She awoke on a Monday morning not feeling well. She was a bit nauseated with severe heartburn. She had taken an antacid with no relief, and the pain grew worse. Helene had no history of cardiac trouble and was the picture of health...

A man and his son returned home after playing outside for an hour under strong sunlight....

A man and his son returned home after playing outside for an hour under strong sunlight. The boy complained to his father that their room is unusually dark. Explain the boy’s observation using your knowledge of how photoreceptors work.

Nicole had a 5-year-old son, Karson, who had been diagnosed by his pediatric psychiatrist with ADHD....

Nicole had a 5-year-old son, Karson, who had been diagnosed by his pediatric psychiatrist with ADHD. The physician tried multiple different medications and dosages with varying results to help Karson. Some would help for a while but then stop working; some would not help at all. Frustrated after a year of medication trials, Nicole came across an advertisement for a new center called Brain Training that promised to help children with ADHD without the use of medications. It was advertised...

Question