Question

In: Finance

You want to buy a car, and a local bank will lend you $30,000. The loan...

You want to buy a car, and a local bank will lend you $30,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 5% with interest paid monthly.

What will be the monthly loan payment? Do not round intermediate steps. Round your answer to the nearest cent.

$  

What will be the loan's EAR? Do not round intermediate steps. Round your answer to two decimal places.

%

Solutions

Expert Solution

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate = 5/12 =

0.416667

FV = Future value =

$0

N = Total payment term =

                          60

PV = Present value of loan =

-$30,000

CPT > PMT = Monthly Payment =

$566.14

Alternate formula-based method:

PMT = Payment = |PV| x R% x (1+R%)^N / ((1+R%)^N - 1)

$566.14

EAR = (1+Rate/12)^12 - 1 = =(1+5%/12)^12-1 =

5.12%


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