1000 points will be 16100 534 AM O Type here to search Solut

10.00 points will be $16,100 534 AM O Type here to search

Solution

Loan Amount = 80% x $3,280,000 = $2,624,000

No. of Periods = 38 x 12 = 456

PVA = P*[{1 - (1+r)^-n} / r]

$2,624,000 = $16,100[{1 - (1+r)^-456} / r]

To find the interest rate, we need to solve this equation on a financial calculator, using a spreadsheet, orby trial and error. If you use trial and error, remember that increasing the interest rate decreases the PVA,and decreasing the interest rate increases the PVA.

a). This is the monthly interest rate. To find the APR with a monthly interest rate, we simply multiply the monthly rate by 12, so the APR is:

APR = 0.005670 × 12

APR = 0.0680 or 6.80%

b). EAR = (1 + i/n)ⁿ - 1

= (1.005670)¹² - 1 = 1.0702 - 1 = 0.0702, or 7.02%

INPUT	456		-$2,624,000	$16,100	0
TVM	N	I/Y	PV	PMT	FV
OUTPUT		0.5670%