Determine the comparable interest rate for a $50,000 loan when the quoted information is 12.1% + 0.5 pt + $200. (Round your answer to two decimal places.)
To determine the comparable interest rate for a $50,000 loan with the given information of 12.1% + 0.5 pt + $200, you need to follow these steps:
1. Convert the percentage into a decimal: Divide the given percentage by 100. For 12.1%, you'll have 0.121.
2. Calculate the dollar value of the discount points: Multiply the loan amount by the discount point percentage. In this case, 0.5 pt (0.005) multiplied by $50,000 equals $250.
3. Add the dollar value of the discount points and the quoted dollar amount ($200) together: $250 + $200 = $450.
4. Calculate the interest amount: Multiply the loan amount by the decimal form of the quoted interest rate. In this case, 0.121 multiplied by $50,000 equals $6,050.
5. Add the interest amount and the dollar amount from step 3 together: $6,050 + $450 = $6,500.
6. Calculate the comparable interest rate: Divide the amount from step 5 by the loan amount, and then multiply by 100 to get a percentage. In this case, ($6,500 / $50,000) * 100 = 13.00%.
Therefore, the comparable interest rate for the $50,000 loan with the quoted information is approximately 13.00%.