Question

In: Finance

You have just borrowed $160,000 to buy a condo. You will repay the loan in equal...

You have just borrowed $160,000 to buy a condo. You will repay the loan in equal monthly payments of $1,287.40 over the next 30 years. a-1. What monthly interest rate are you paying on the loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a-2. What is the APR? (Do not round intermediate calculations. Enter your answer as a whole percent.) b. What is the effective annual rate on that loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What rate is the lender more likely to quote on the loan?

Expert Solution

PV = 160000

N = 30*12 = 360

PMT = 1287.40

R = ?

Using excel function, R = Rate(N,PMT,PV)

Rate(360,1287.40,-160000) = 0.0075

Monthly interest rate = 0.0075 = 0.75%

a-2

APR = 0.0075*12 = 0.09 = 9%

b.

EAR = [1+i/m]^m - 1

i - nominal rate

m - no. of compounding periods per year

EAR = (1+ 0.09/12)^12 - 1 = 0.0938 = 9.38%

c. Lender will quote the loan at 9% per anum

jeff jeffy answered 2 years ago

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