Question

In: Finance

4. A $600,000 CPM fully amortizing loan is made, at a 4% interest rate compounded monthly,...

4. A $600,000 CPM fully amortizing loan is made, at a 4% interest rate compounded monthly, for a 30 year term. Loan comes with a charge of 5 points. What is the effective annual rate on the loan?

*do work in EXCEL please*

Solutions

Expert Solution

Effective rate = 4.43%

First find the monthly payment
Loan amount 600000
Number of months 360
Rate 4%
Monthly payment $2,864.49
Find the Effective rate
Loan amount 570000
Number of months 360
Monthly payment $2,864.49
Rate per month 0.37%
Effective rate 4.43%


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