You have just purchased a new warehouse. To finance the purchase, you’ve arrange

Question

You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 39-year mortgage loan for 85 percent of the $3,390,000 purchase price. The monthly payment on this loan will be $17,200.

What is the APR on this loan? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

What is the EAR on this loan? (Round your answer as directed, but do not use rounded numbers in intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 39-year mortgage loan for 85 percent of the $3,390,000 purchase price. The monthly payment on this loan will be $17,200.

Explanation / Answer

Loan amount is 85%. Therefore loan amount is 0.85*3390000 = $2,881,500

nper =number of periods =39*12 = 468 months

Monthly payment = 17,200

APR = rate(468,-17200,2881500) =0.551% per month

Hence APR = 0.551% * 12 =6.62%

EAR = (1+APR per month)^12 -1 (beacuse monthly payment)

EAR = ( 1+ 0.00551)^12 -1 = 0.06816 = 6.82%

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