A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow $40,000, the interest for the year will be $4,800. Because you must repay a total of $44,800 in one year, the finance company requires you to pay $44,800/12, or $3,733.33, per month over the next 12 months. a. What rate would legally have to be quoted? Annual percentage rate 21.46% b. What is the effective annual rate? 23.70%| Effective annual rate

A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow $40,000, the interest for the year will be $4,800. Because you must repay a total of $44,800 in one year, the finance company requires you to pay $44,800/12, or $3,733.33, per month over the next 12 months. a. What rate would legally have to be quoted? Annual percentage rate 21.46% b. What is the effective annual rate? 23.70%| Effective annual rate

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A floating rate mortgage loan is made for $185,000 for a 30-year period at an initial rate of 12 percent interest. However, the borrower and lender have negotiated a monthly payment of $1,480. Required: a. What will be the loan balance at the end of year 1? b. If the interest rate increases to 13 percent at the end of year 2, how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,480?
Question 5. Attached is a similar question answered
A floating rate mortgage loan is made for $170,000 for a 30-year period at an initial rate of 12 percent interest. However, the borrower and lender have negotiated a monthly payment of $1,360. Required: a. What will be the loan balance at the end of year 1? b. If the interest rate increases to 13 percent at the end of year 2, how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,360? Complete this question by entering your answers in the tabs below. Required A Required B What will be the loan balance at the end of year 1? Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. Loan balance
You plan to borrow $37,200 at a 7.2% annual interest rate. The terms require you to amortize the loan with 7 equal end-of-year payments. How much interest would you be paying in Year 2? O a. $2,678.40 O b. $2,370.79 O c. $2,404.40 O d. $6,950.78 Oe. $6,483.94
A $178,000 mortgage loan is offered at an APR of 4%. Follow the instructions below the table. The loan payment formula was used to calculate the monthly payments for the loans and results are reported in the table below. You do NOT have to verify the given payment entries (you already used the formula for calculating payments in the first part Loan term in years Monthly Payment on $178,000 loan (in $) Total amount paid back over the full loan term (in $) Interest over the full loan term (in $) Difference in monthly payment from option above (in $) t = 15 years Pmt = $ 1316.64 F = I = No entry here t = 30 years Pmt = $ 849.80 F = I = Difference in MONTHLY payment t = 40 years Pmt = $ 743.93 F = I = Difference in MONTHLY payment t = 50 years Pmt = $ 686.56 F = I = Difference in MONTHLY payment For each loan term option, calculate the total amount paid back over the…
Ross Land has a loan of $8,500 compounded quarterly for four years at 4%. What is the effective interest rate for the loan? Click here to view page 1 of the future value table. Click here to view page 2 of the future value table. The effective interest rate is %. (Round to two decimal places as needed.)
Bank JPX is offering personal loans of $35,000 to be repaid over 6 years with payments of $625 per month. The first loan payment occurs one month after borrowing the $35,000. What effective annual rate (EAR) are they charging on this loan?
you have just borrowed $51,107 at an annual interest of 7.6% and must repay the loan in equal installments at the end of each of the next 7 years. By how much would you reduce the amount you owe (that is, principal) at the end of the first year? (Hint: Compute annual loan payment first and then the loan amortization schedule for the first year.) Group of answer choices $5,798.23 $5,790.23 $5,792.23 $5,796.23 $5,794.23
You plan to borrow $32,200 at an 8.2% annual interest rate. The terms require you to amortize the loan with 7 equal end-of-year payments. How much interest would you be paying in Year 2? Oa. $5,755.17 Ob. $2,346.29 $2,384.99 Od. $2,640.40 O$6,227.10
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $5,100. Because you must repay a total of $35,100 in one year, the finance company requires you to pay $35,100/12, or $2,925.00, per month over the next 12 months. a. What rate would legally have to be quoted? b. What is the effective annual rate?
An industrial bank will loan you $10,500 for two years to buy miscellaneous equipment for your firm. The loan must be repaid in equal monthly payments. The annual interest rate on the loan is 11.5% of the unpaid balance. How much will the monthly payments be? Numeric Response
A house price of $100,000 can be financed with two loans below with monthly payments. The total origination cost associated with these two loans is $2,000. Loan Amount Term (years) Interest Rate 1st loan $ 80,000 30 5% 2nd loan $ 10,000 30 7% Alternatively, the borrower can borrow one loan in the amount of $90,000 with origination cost of $1,500. What should the interest rate be on the $90,000, 30 years loan with monthly payments so that the borrower will be indifferent between these two alternatives? 4.28% 5.28% 6.28% 7.28%

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