Determine the comparable interest rate for a $50,000 loan when the quoted information is 11.8% + 0.5 pt + $300. (Round your answer to two decimal places.)
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To determine the comparable interest rate for the loan, you need to consider the components of the quoted information: 11.8%, 0.5 points, and $300.
First, let's calculate the interest rate based on the percentage provided, which is 11.8%. The interest rate is expressed as a decimal, so divide 11.8 by 100 to convert it to a decimal:
11.8% / 100 = 0.118
Next, let's calculate the interest rate based on the points. For every point, you need to add 0.01 to the interest rate. In this case, the quote includes 0.5 points:
0.5 points * 0.01 = 0.005
Now, let's calculate the total interest rate by adding up the interest rate based on the percentage and the interest rate based on the points:
0.118 + 0.005 = 0.123
Lastly, let's consider the additional fee of $300. This fee adds to the cost of the loan, and to calculate its impact on the interest rate, divide it by the loan amount. In this case, the loan amount is $50,000:
$300 / $50,000 = 0.006
Now, add this additional fee to the total interest rate:
0.123 + 0.006 = 0.129
Finally, round the comparable interest rate to two decimal places:
0.129 rounded to two decimal places is 0.13.
Therefore, the comparable interest rate for the $50,000 loan with the quoted information is 0.13 or 13%.