Problem 5-43 EAR versus APR [LO 4] You have just purchased a new warehouse. To finance the purchase, you've arranged for a 32-year mortgage loan for 80 percent of the $3,320,000 purchase price. The monthly payment on this loan will be $16,500. Hint: Please remember the Excel formula which is =RATE(nper,-pmt,-pv,fv, 1); however, for this question we must adjust this formula. You know that your payments are cash outflows (negative), but you have to determine whether that loan is a cash inflow (positive) or outflow (negative) and whether it is a FV or PV. Also, you need to adjust this formula for whether the payment is at the beginning (1) or end (0) of the period. a. What is the APR on this loan? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the EAR on this loan? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. APR b. EAR % %
Problem 5-43 EAR versus APR [LO 4] You have just purchased a new warehouse. To finance the purchase, you've arranged for a 32-year mortgage loan for 80 percent of the $3,320,000 purchase price. The monthly payment on this loan will be $16,500. Hint: Please remember the Excel formula which is =RATE(nper,-pmt,-pv,fv, 1); however, for this question we must adjust this formula. You know that your payments are cash outflows (negative), but you have to determine whether that loan is a cash inflow (positive) or outflow (negative) and whether it is a FV or PV. Also, you need to adjust this formula for whether the payment is at the beginning (1) or end (0) of the period. a. What is the APR on this loan? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What is the EAR on this loan? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. APR b. EAR % %
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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![Problem 5-43 EAR versus APR [LO 4]
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 32-year mortgage loan for 80 percent of
the $3,320,000 purchase price. The monthly payment on this loan will be $16,500. Hint: Please remember the Excel formula which
is =RATE(nper,-pmt,-pv,fv, 1); however, for this question we must adjust this formula. You know that your payments are cash
outflows (negative), but you have to determine whether that loan is a cash inflow (positive) or outflow (negative) and whether it is
a FV or PV. Also, you need to adjust this formula for whether the payment is at the beginning (1) or end (0) of the period.
a. What is the APR on this loan?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the EAR on this loan?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
a. APR
b. EAR
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff92f2c65-65db-4607-86fe-fcc8dd89df7a%2Fadfe233c-7d52-4a36-a09b-51f115bfaed1%2Fhdl2j09_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 5-43 EAR versus APR [LO 4]
You have just purchased a new warehouse. To finance the purchase, you've arranged for a 32-year mortgage loan for 80 percent of
the $3,320,000 purchase price. The monthly payment on this loan will be $16,500. Hint: Please remember the Excel formula which
is =RATE(nper,-pmt,-pv,fv, 1); however, for this question we must adjust this formula. You know that your payments are cash
outflows (negative), but you have to determine whether that loan is a cash inflow (positive) or outflow (negative) and whether it is
a FV or PV. Also, you need to adjust this formula for whether the payment is at the beginning (1) or end (0) of the period.
a. What is the APR on this loan?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
b. What is the EAR on this loan?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
a. APR
b. EAR
%
%
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