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Rasek [7]
2 years ago
12

Mr. Rich arranged for a mortgage loan for 65 percent of the $2.5 million purchase price of a home. The monthly payment will be $

10,400 and the mortgage term is 30 years. What is the EAR on this loan?
Business
1 answer:
olga2289 [7]2 years ago
7 0

Answer:

Effective annual rate = 6.82 %

Explanation:

given data

loan = 65 % of  $2.5 million = $1625000

monthly payment pmt = $10,400

time = 30 year = 30 × 12 = 360

solution

we get here rate first by present value

present value = pmt × \frac{1-(1+r)^{-t}}{r}   ..........1

$1625000 = $10400  × \frac{1-(1+r)^{-360}}{r}

15.625 = \frac{1-(1+r)^{-360}}{r}

solve it we get

r = 0.5517%

and Effective annual rate  will be

Effective annual rate = (1+r)^{12} -1

Effective annual rate = (1+0.005517)^{12} -1

Effective annual rate = 0.068250

Effective annual rate = 6.82 %

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Mark as Brainliest please!

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