A $ 200 000 loan is made with 30 years maturity and monthly compounded. The loan is based on a teasing rate of 2% and the market rate is 6%. The difference will be added to loan balance after 1 year and reset date is 1year. After that, the new pay rate is 7%. a)What is the PMT in year 1? What is the loan balance at the end of year 1 ? b) What is the PMT in year 2? What is the loan balance at the end of year 2?

A $ 200 000 loan is made with 30 years maturity and monthly compounded. The loan is based on a teasing rate of 2% and the market rate is 6%. The difference will be added to loan balance after 1 year and reset date is 1year. After that, the new pay rate is 7%. a)What is the PMT in year 1? What is the loan balance at the end of year 1 ? b) What is the PMT in year 2? What is the loan balance at the end of year 2?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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