Determine the comparable interest rate for a $80,000 loan when the quoted information is 12.1% + 0.5 pt + $300. (Round your answer to two decimal places.)
-3x (7x3 – 5x2 + 7x – 9)
-3x (7x3 – 5x2 + 7x – 9)
To determine the comparable interest rate for a loan, you need to consider all the components of the quoted information - the interest rate, points, and fees.
Let's break down the given information:
- Interest rate: 12.1%
- Points: 0.5 pt (0.5% of the loan amount)
- Fees: $300
First, calculate the dollar value of the points for the loan. Since 1 point is equal to 1% of the loan amount, 0.5 point would be 0.5% of the loan amount. So, for an $80,000 loan, the points would be 0.5% * $80,000 = $400.
Next, add the fees and points to the loan. The total amount to be borrowed is the original loan amount plus the points and fees. In this case, it would be $80,000 + $400 + $300 = $80,700.
Now, calculate the interest paid for the loan. Multiply the total loan amount by the interest rate expressed as a decimal. In this case, it would be $80,700 * 0.121 = $9,800.70.
Finally, to find the comparable interest rate, divide the total interest paid by the original loan amount and express it as a percentage. So, the comparable interest rate for the $80,000 loan is $9,800.70 / $80,000 = 0.1225075.
Now, round the calculated comparable interest rate to two decimal places. Therefore, the comparable interest rate is 12.25%.
So, the comparable interest rate for the $80,000 loan when the quoted information is 12.1% + 0.5 pt + $300 is 12.25%.