aYou make monthly payments on a loan. What is the effective monthly interest rat

Question

aYou make monthly payments on a loan. What is the effective monthly interest rate for this loan with a 5.4% nominal annual interest rate if the loan is compounded monthly? Enter your answer as a percentage (rounded to the nearest hundreth of a percent) between 0 and 100.

b)"You have $18,200 in a savings account that has been paying 5.9% interest, compounded weekly. If you made one deposit when you opened the account exactly 7 years ago and made no other deposits after that, how much did you initially deposit in the account? Assume 52 weeks per year."

c)"Bank A offers an interest of 4% compounded daily, while bank B offers continuous compounding at 3.87% APR. If you deposit $7,315 with each bank, what will be the difference in the two bank account balances after 2 years? Enter your answer as a positive number."

d)"To purchase a new car, you borrow $29,000 for 7 years at the rate of interest of 13.9% APR compounded monthly, and you make monthly car payments. How much interest do you pay on the 9th payment?"

e)"Suzan is considering buying a home for $379,000. If she makes a down payment of $72,000 and takes out a mortgage on the rest of the money at 6.92% compounded monthly for 8 years. What will be the principal payment for her 56th payment? (Assume she makes monthly payments)"

f)"You receive a loan for $11,931 where the APR is 7.6%, compounded monthly. You make a payment of $931.83 on this loan every 6 months (i.e., 2 payments per year), which will enable you pay off the loan in eactly 9 years. Immediately after making your regular payment at the end of 5 years, you desire to pay the remainder of the loan in a single payment. Compute the amount you must pay for the remainder of the loan."

Explanation / Answer

a) The Effective Monthly Rate will be APR/12 i.e. 5.4%/12 = 0.45%

b) Here Effective R = 5.9%/52, NPER = 52*7, PV = 18,200
Using FV = PV(1+R)NPER = 27,500.04

c) for continuous compounding,
FV = PV*e(rT)
Here, r = 3.87%, T = 2, PV = 7,315
FV = 7,903.67

For Annual Compounding,
FV = PV(1+r)T = 7,315*(1+0.04)2 = 7,911.90

Difference = 7,911.90 - 7,903.67 = 8.24

d) You use a loan schedule excel to calculate the interest component.
Here, PV = 29,000, nper = 7*12 = 84, r = 13.9%/12 = 1.1583%

EMI = 541.86, Interest in 9th Instalment = 316.04

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.