Question

In: Finance

#1) On June 1, you borrowed $195,000 to buy a house. The mortgage rate is 5.20...

#1) On June 1, you borrowed $195,000 to buy a house. The mortgage rate is 5.20 percent. The loan is to be repaid in equal monthly payments over 15 years. How much of the first payment applies to the principal balance? $714.43 $722.50 $717.51 $756.70 $658.56

#13) You want to borrow $34,800 and can afford monthly payments of $960 for 48 months, but no more. Assume monthly compounding. What is the highest APR rate you can afford?

13.18 percent

14.52 percent

9.24 percent

13.67 percent

14.82 percent

Solutions

Expert Solution

1) $717.51
Working:
Monthly repayment = =pmt(rate,nper,-pv)
= $   1,562.44
Where,
rate 5.20%/12 = 0.0043333
nper 15*12 = 180
pv = $ 1,95,000
Interest expense = Loan amount * Monthly interest rate
= $   1,95,000 * 0.0043333
= $       845.00
First month payment applied to principal balance = Monthly repayment - Interest expense
= $ 1,562.44 - $ 845.00
= $     717.44
Difference of $ 0.07 is due to rounding off difference.
2) 14.52%
Working:
APR = =rate(nper,pmt,-pv)*12
= 14.52%
Where,
nper 48
pmt $             960
pv $       34,800

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