math

$400,000 for 30-years at a fixed APR of 3.87%. The loan payments are monthly and interest is compounded monthly.

  1. 👍
  2. 👎
  3. 👁
  1. what a deal!
    Oh - was there a question in there somewhere?

    1. 👍
    2. 👎
  2. What is the effective annual rate on the loan? (I.e., what is the interest rate once we take into account compounding?)

    1. 👍
    2. 👎
  3. We don't need the principal nor the time to find the effective annual rate

    All we are looking for it the annual rate i, which is equivalent to a rate of .0387/12 per month
    that is,

    (1+i)^1 = (1+.0387/12)^12
    1+i = 1.0393939

    i = .03939 or appr 3.939% (note, the decimals only appear to repeat at the beginning, they do not)

    check: take 100 for 5 years
    at 3.939..%
    amount = 100(1.03939...)^5 = 121.315
    at 3.87% compouned monthly,
    amount = 100(1 + .0387/12)^60 = 121.31
    well, how about that?

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. MATH 123

    Darla purchased a new car during a special sales promotion by the manufacturer. She secured a loan from the manufacturer in the amount of $23,000 at a rate of 4.6%/year compounded monthly. Her bank is now charging 6.2%/year

  2. Financial

    You need a 30-year, fixed-rate mortgage to buy a new home for $235,000. Your mortgage bank will lend you the money at an APR of 5.35 percent for this 360-month loan. However, you can afford monthly payments of only $925, so you

  3. math

    A store offers a loan for $900 to buy a computer. The terms of the loan are for 9% simple interest and equal monthly payments for three years. What is the monthly payment?

  4. Finance

    You take out a 30-year $100,000 mortgage loan with an APR of 6 percent and monthly payments. In 12 years you decide to sell your house and pay off the mortgage. What is the principal balance on the loan? I am working this on the

  1. Algebra 2

    Consider the mortgage loan of $150,000 at a nominal 6% yearly interest applied monthly at a rate of .5% per month. Monthly payments of $1,000 are being made on this loan. Evaluate how much is owed after 1 month.

  2. Finance

    You have arranged for a loan on your new car that will require the first payment today. The loan is for $32,000, and the monthly payments are $620. Required: If the loan will be paid off over the next 60 months, what is the APR of

  3. algebra

    A music company offers a loan to buy a drum set for $1500. The simple interest is 11.8% and the loan will be paid in equal monthly payments for 2 years. What is the monthly payment?

  4. Finance

    Sheet Metals has an outstanding loan that calls for equal annual payments of $12,600.47 over the life of the loan. The original loan amount was $72,000 at an APR of 8.15 percent. How much of the third loan payment is interest?

  1. Math

    1. When their child was born, Elaine and Mike Porter deposited $5,000 in a savings account. The money ears interest at 6 percent compounded quarterly. How much will the account be worth when their child celebrates her second

  2. Finance

    Loan Payments - If you take out an $8,000 car loan that calls for 48 monthly payments APR of 10 percent, what is your monthly payment? What is the effecgive annual interest rate on the loan? the montly rate is 0.10/12=.0083333...

  3. Finance

    Rob and laura wish to buy a new home. The price is $187,500 and they plan to put down 20%. CIBC will lend them at a fixed rate for 25 years with monthly payments. How much will Bob and Laura's monthly payment be? Assuming they pay

  4. math

    The Sandersons are planning to refinance their home. The outstanding principal on their original loan is $100,000 and was to amortized in 240 equal monthly installments at an interest rate of 11%/year compounded monthly. The new

You can view more similar questions or ask a new question.