You want to borrow $94,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,900, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?

You want to borrow $94,000 from your local bank to buy a new sailboat. You can afford to make monthly payments of $1,900, but no more. Assuming monthly compounding, what is the highest rate you can afford on a 60-month APR loan?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 15P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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Loan is an agreement between lender and borrower where lender provide funds to borrower which repaid by borrower along-with interest either in lump-sum or installments. Interest is cost of loan.

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