You have just purchased a home by borrowing $400, 000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly. What is the effective annual rate on the loan? (I.e., what is the interest rate once we take into account compounding?)

You have just purchased a home by borrowing $400, 000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly. What is the effective annual rate on the loan? (I.e., what is the interest rate once we take into account compounding?)

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

See similar textbooks

Related questions

Q: out a 36-month installment loan to finance a delivery van for $26,100. The payments are $987 per…

A: The given problem can be solved using FV function in excel. FV function computes outstanding loan…

Q: You borrow $10,000 from a bank for three years at an annual interest rate, or annual percentage rate…

A: The rate that is charged at an annual basis on the borrowing funds as well as earned annually on…

Q: You are considering a car loan with a stated APR of 6.78% based on monthly compounding. What is the…

A: Effective annual rate is the rate of interest that actually paid or earned. It can be calculated by…

Q: Suppose you lend $11,500 to a friend at an APR of 10.00%. Your friend will pay you back beginning…

A: The periodic payment can be made monthly, quarterly, semi-annually or annually. Periodic payment is…

Q: If you borrow $35,000 to buy a car on 10 years loan at 9% annual interest rate, what is the % of…

A: The monthly payment for the loan borrowed is calculated by the present value of the annuity formula.…

Q: Six years ago you acquired a 15-year loan of $140,400, charging 3.4% annual interest, compounded…

A: monthly payment formula: pmt=p×rm1-1+rm-m×n where, p = principal r = rate of interest m = frequency…

Q: Suppose you secure a $250,000 mortgage loan to be paid off over 30 years at an annual interest rate…

A: Calculator steps: I/y = rate = 7.1%/12 = 0.5916667% NPER = Number of periods = 30*12 = 360 PV =…

Q: You decide to buy a house costing $6,000,000. You pay $1,000,000 down, and the remainder will be…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: at period of time could you pay back a loan of $3000 by making monthly payments of $110 if interest…

A: Loans are paid by the equal amount of monthly payments these payments carry the payment of principal…

Q: You are considering taking out a loan of 20,000.00 that will be paid back over 7 years with monthly…

A: given information loan amount = 20,000 interest rate = 4.8% monthly interest rate = 0.004 no of…

Q: Suppose you have three personal loans outstanding to your friend Elizabeth. A payment of $1,000 is…

A: To Find: Annual percentage rate Monthly payment Note:- As method of Calculation is not given, I…

Q: How much the monthly payment on a $114,000 home be if you get 4.1% interest over a 15 year loan with…

A: Here, Loan Amount is $114,000 Interest Rate is 4.1% Time Period of Loan is 15 years Compounding…

Q: You are considering taking out a loan of 20,000 that will be paid back over 7 years with monthly…

A: Interest amount decreases and the principal paid amount increase as loan payments proceed further.

Q: Suppose that your unsubsidized Stafford loans plus accumulated interest total $ 23000 at the time…

A: Given:

Q: You borrow $200,000 with a 25-year payback term and a variable APR thatstarts at 8% and can be…

A: Calculation of the initial monthly Payment is shown: Formulation is shown: To open the "PMT…

Q: A homeowner just obtained a 30-year (360-month) mortgage for $120,000. The mortgage has a fixed…

A: A mortgage, often known as a mortgage loan, is a contract between you (the borrower) and a mortgage…

Q: Suppose that 10 years ago you bought a home for $170,000, paying 10% as a down payment, and…

A: Computation as follows: Down payment: Hence, the down payment is $17000. Mortgage loan: Hence, the…

Q: If a person has taken a home loan of 50000 TL with an annual effective interest rate of 12% and his…

A: A home loan is taken in order to finance the purchase of a house. The borrower makes regular…

Q: You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20…

Q: years ago you acquired a 15-year loan of $180,300, charging 4.5% annual interest, compounded…

A: Monthly payment when interest rate was 4.5%: $1,379.28 Calculation: Loan payment…

Q: Assume that today you borrowed $30,000 at 4.25% compounded monthly and will pay off the loan with…

A: The given problem relates to concept of annuity. An annuity is a series of uniform cash flows over a…

Q: Compute the monthly payment on a $65,000 loanif the principal and interest are to be repaid in 84…

A: a) Loan amount (PV) of $65,000 needs to be repaid in (n) 84 equal installments at an annual interest…

Q: You invest $5,000 into a money market account that pays interest monthly (e.g., interest is…

A: Future Value = Present Value * (1+r)^n Where, n = no. of compounding period i.e. 3 years * 12 = 36 r…

Q: You can afford to pay $15,000 at the end of each of the next 30 years to repay a home loan. If the…

A: Present value of annuity is the current worth of future annual cash flows over a period of time at a…

Q: will we owe more or less than $200,000 (half the original loan amount)?

A: Loan Amount: It represents the credit taken by the borrower from the lender. The borrower makes…

Q: You were buying a House for $190,000 with a down payment of $57,000. The loan will be paid back over…

A: A study that proves that the future worth of the money is lower than its current value due to…

Q: Someone is borrowing from a five-six ( Bumbay ) money lender. How much will be charged if you want…

A: Interest is referred to as the monetary charge which is to be paid to the moneylender on the…

Q: In order to solve this question, would I use the compounded monthly formula and then subtract the…

A: We will do it in following steps:First we will find out what should be the monthly mortgage payment…

Q: If you borrow $25,000 from a local finance company and you are required to pay $4,424.50 per year…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: Suppose that your unsubsidized Stafford loans plus accumulated interest total $ 23000 at the time…

A: Borrowings are the liability of the company which is used to finance the requirement of the funds.…

Q: Suppose that your unsubsidized Stafford loans plus accumulated interest total $ 34000 at the time…

A: Loan amount (P) = $34000 Monthly interest rate (r) = 0.00625 (0.075 / 12) Monthly period (n) = 120…

Q: You have borrowed $14,300 at a compound annual interest rate of 15 percent. You feel that you will…

A: given, p= $14300 pmt = $3000 r=15%

Q: A borrower takes out a 30-year loan for a house worth $250,000. If the annual interest rate is 6%.…

A: Current value of loan (PV) = $250,000 Interest rate (r) = 6% Period for future value (t) = 12 Years…

Q: You put \$1,000$1,000 into a savings account today that offers a 5\%5% APR with semi-annual…

A: Banks usually offer loans to customers, and they also accept deposits from the customers. The…

Q: An individual needs $12,000 immediately as a down payment on a new home. Suppose that he can borrow…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You want to buy a $210,000 home. You plan to pay $10500 as a down payment, and take out a 30 year…

A: To find the loan amount one has to deduct the down payment from the total loan amount.

Q: You have maxed out your $10,000 credit card, which is being charged 12.8% annual interest compounded…

A: Calculation of minimum monthly and weekly payments:Answer:The minimum monthly payment and weekly…

Q: Suppose that 10 years ago you bought a home for $170,000, paying 10% as a down payment, and…

A: Down payment: Hence, the down payment is $17000. Mortgage loan: Hence, the mortgage loan is…

Q: You borrowed $100,000 for a period of 30 years at fixed APR of 5.5% to buy an apartment. What is…

A: Formula: Monthly payment = ( Present value of loan ) / [ ( 1 - ( 1 + r )-NT ) / r / n ] R =…

Q: If you borrow $1,000 and pay back $1,728 in three years, what annual rate of interest are you…

A: Annual Percentage rate (APR) is the percentage rate that shows the interest calculates on the…

Q: You are buying a house for $200,000.00 with a downpayment of $40,000.00. The loan will be paid back…

A: An amortization table is a table that helps to compute the periodic payment, interest paid,…

Q: You want to borrow $30,000. For the loan to you must repay $1100 every quarter (4 times per year)…

A: Loan is an agreement between lender and borrower where lender agrees to provide funds to lender for…

Q: you have 23,000 car loan with 6% apr, compounded monthly. the loan is for five years. when you make…

A: The question gives the following information:

Q: You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20…

A: “Hi, there, Thanks for posting the question. As per our Q&A honour code, we must answer the…

Question

You have just purchased a home by borrowing
$400, 000 for 30-years at a fixed APR of 3.87%.
The loan payments are monthly and interest is
compounded monthly.
What is the effective annual rate on the loan?
(I.e., what is the interest rate once we take
into account compounding?)
0.0394
2.1239
2.0394
1.0394
O O

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?
1. You have just purchased a home by borrowing $400, 000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly. What is the periodic interest rate? (l.e., what is the monthly interest rate?) O 0.0129 0.0032 0.0394 0.0013 4
Suppose you purchase a home and obtain a 15-year fixed-rate loan of $195,000 at an annual interest rate of 6.0%. a) What is your monthly payment? N: months I %: P.V: $ PMT: $ F.V: 0 P/Y: 12 C/Y: 12 b) Of the first month's mortgage payment, how much is interest? HINT: I=Prt Interest: I=$ c) Of the first month's mortgage payment, how much is applied to the principal? HINT: PMT - Interest Amount Applied to Principal: $ d) How much is your outstanding balance after the first month’s payment? HINT: Principal - Amount Applied to Principal Outstanding Balance after first payment: $
You have just purchased a home by borrowing \$400,000$400,000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly. What is the periodic interest rate? (I.e., what is the monthly interest rate?)
The following loan is a simple interest amortized loan with monthly payments. $155000, 9 1/2%, 30 years(a) Find the monthly payment. (Give your answer to the nearest cent.)Payment $ (b) Find the total interest for the given simple interest amortized loan. (Give your answer to the nearest cent.)Total interest $
The following loan is a simple interest amortized loan with monthly payments. $7000, 7%, 4 years (a) Find the monthly payment. (Give your answer to the nearest cent.) Payment $189.58 (b) Find the total interest for the given simple interest amortized loan. (Give your answer to the nearest cent.) Total interest $ 2100 X
You are loaned $300 at the end of years 1, 2, and 3. You pay this loan back with payments of X at the end of year 5, and $300 at the end of years 4, 6, and 7. Find X if the effective annual interest rate i = .07
The following loan is a simple interest amortized loan with monthly payments. $5000, 7 1/2%, 4 years (a) Find the monthly payment. (Give your answer to the nearest cent.)Payment $ (b) Find the total interest for the given simple interest amortized loan. (Give your answer to the nearest cent.)Total interest $
Suppose you purchase a house for $200,000.00 by getting a mortgage for $180,000.00 and paying a $20,000.00 down payment. (i). If you get a 30-year mortgage with a 7% interest rate p.a. compounded quarterly, what are the quarterly payments? (ii). What would the loan balance be at the end of the first year?
What would be the sum of all the payments made (i.e., total $s paid over the 30 years, ignoring time value) on the following house mortgage? Loan amount is $175,000 with an interest rate of 6.4% per annum, term of 30 years, and monthly payments. (Round to nearest penny and enter, for example, as 123456.78) Answer:
You have just purchased a car and taken out a $50,000 loan. The loan has a five-year term with monthly payment and an APR of 5.5%. 1. What is the monthly interest rate? А. 2.75% В. 0.46% О С. 0.015% O D. 1.38%
Suppose that you borrow$ 12000 at interest rate of 5% per year. If you must be repaid the loan in equal end of year payments over the next 4 years, how much must you repay at the end of each year? O a. $3672 Ob. $3384 Oc. $2672 O d. $2384