Determine the comparable interest rate for a $70,000 loan when the quoted information is 12.4% + 0.5 pt + $300. (Round your answer to two decimal places.)
To determine the comparable interest rate for the $70,000 loan, you need to consider the three components of the quoted information: the stated interest rate, any points, and any additional fees.
First, let's calculate the interest rate without considering the points and fees. The stated interest rate is 12.4%.
Next, let's calculate the effect of the points. In this case, the quoted information mentions 0.5 points. One point is equal to 1% of the loan amount. So, 0.5 points is equal to 0.5% of the loan amount.
To calculate the monetary value of the points, multiply the loan amount by the percentage:
0.5% * $70,000 = $350
Now, let's consider the additional fee of $300. This fee is not a percentage of the loan amount, so it doesn't require any calculations.
To find the total cost of the points and fees, add the monetary value of the points and the additional fee:
$350 + $300 = $650
Now, we can calculate the total cost of the loan by adding the interest rate with the cost of the points and fees:
12.4% + $650 = 12.4% + ($650 / $70,000)
To find the equivalent interest rate, divide the total cost by the loan amount and express it as a percentage:
(12.4% + $650 / $70,000) * 100 = (0.124 + 0.00928) * 100 = 0.13328 * 100 = 13.33%
Therefore, the comparable interest rate for the $70,000 loan with the quoted information of 12.4% + 0.5 pt + $300 is 13.33%.