Question

In: Finance

You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year...

You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80 percent of the $2,600,000 purchase price. The monthly payment on this loan will be $11,000.

a. What is the APR on this loan?

b. What is the EAR?

Solutions

Expert Solution

a.Information provided:

Purchase price = $2,600,000

Loan= present value= 0.80*$2,600,000 = $2,080,000

Time= 30 years*12= 360 months

Monthly payment= $11,000

The yield to maturity is calculated by entering the below in a financial calculator:

PV= -2,080,000

N= 360

PMT= 11,000

Press the CPT key and I/Y to compute the yield to maturity.

The value obtained is 0.4058

Therefore, the yield to maturity is 0.4058%*12= 4.8690%  4.87%.

2.The effective annual yield is calculated using the below formula:

Effective annual yield= (1+r/n)^n-1

Where r is the interest rate and n is the number of compounding periods in one year.

Effective annual yield = ( 1 + 0.0487/ 12)^12 – 1

                                   = 1.0498 – 1

                                          = 0.0498*100

                                          = 4.98%  


Related Solutions

You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year...
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 25-year mortgage for the $1,440,000 purchase price. The monthly payment on this loan will be $10,600. What is the EAR?
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 35-year...
You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 35-year mortgage for 85percent of the $4,400,000 purchase price. The monthly payment on this loan will be $18,500. what is the apr on this loan? what is the ear on this loan?
You have just arranged for a $1,800,050 mortgage to finance the purchase of a large tract...
You have just arranged for a $1,800,050 mortgage to finance the purchase of a large tract of land. The mortgage has a 8.3% APR (semiannual), and it calls for monthly payments over the next 30 years. However, the loan has an eight-year balloon payment, meaning that the loan must be paid off then. How big will the balloon payment be? Show Steps.
Assume that you have purchased a new home and arranged for a mortgage in the amount...
Assume that you have purchased a new home and arranged for a mortgage in the amount of $125,000. The loan is at 4.75% over 15 years. a. What is your monthly payment? b. How much of the loan's principal will you pay over the first year of the loan? c. How much total interest will you pay over years 9 through 11? d. What will be your loan balance after 14 years? e. What is the effective rate on your...
You have just purchased a car and, to fund the purchase, you borrowed $25,500. If your...
You have just purchased a car and, to fund the purchase, you borrowed $25,500. If your monthly payments are $360.24 for the next 7 years, what is the APR of the loan?
You have just arranged a six-year bank loan for $150,000 at an interest rate of 9%...
You have just arranged a six-year bank loan for $150,000 at an interest rate of 9% p.a. with interest compounded quarterly. The loan will be repaid in equal quarterly installments and the first payment will be due one quarter from today. Assuming end-of-the-period cash flows, the principal amount repaid to the bank at the end of the first quarter will be closest to: Group of answer choices $3,375. $4,890. $4,782. $3,267.
1. You have just purchased a Time machine for 10,000,000. It is in the 30% CCA...
1. You have just purchased a Time machine for 10,000,000. It is in the 30% CCA category and will last for 8 years. The asset class will be closed at the end of the project. What is the undepreciated capital cost at the end of the 3rd year? (Create a CCA table and remember the half year rule)
You have just taken out a 30‑year mortgage on your new home for$103,104. This mortgage...
You have just taken out a 30‑year mortgage on your new home for $103,104. This mortgage is to be repaid in 360 equal monthly installments. If the stated (nominal) annual interest rate is 13.35 percent, what is the amount of each of the monthly installments? (Note: The convention when periodic payments are involved is to assume that the compounding frequency is the same as the payment frequency, unless stated otherwise. Thus this implies 13.35 % APR, compounded monthly for this...
Michael Jordan has just arranged to purchase an $825,000vacation home in the Bahamas with a...
Michael Jordan has just arranged to purchase an $825,000 vacation home in the Bahamas with a 20% down-payment. The loan has an interest rate of 5.4% (compounded monthly) and a 30-year term. If the value of the home is expected to appreciate 2% per year, what will his equity in the house be in 8 year?
a. You've just been hired at a new job. You expect to work there for 4...
a. You've just been hired at a new job. You expect to work there for 4 years. Your boss offers you a hiring bonus of either $2,739 today, or an additional $22 per month, starting next month, on your salary. If your investments earn 2.75% APR (compounded monthly), how much would you gain or lose by taking the cash-bonus today? b. You purchase an antique car today for $52,394 You expect the price of the car to rise by 4%...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT