58 You have applied for a mortgage of GHC 60000 to finance t

58. You have applied for a mortgage of GHC 60,000 to finance the purchase of a new home. The bank will require you to make annual payments of GHC 7,047.55 at the end of each of the next 20 years. Determine the interest rate in effect on this mortgage?

Solution

Mortgage amount = GHC 60,000

Annual payment = GHC 7,047.55

Number of annual payments = 20

Using Excel formula RATE

NPER = 20

PMT = -7047.55

PV = 60000

FV = 0

TYPE = 0 (FOR END OF YEAR PAYMENTS)

Interest rate = 11.68%