You buy a house worth $350,000 with 20% down payment and a 30-year mortgage on the remaining value. If your monthly payment is $1,500, what is the annual percentage rate (APR) for the mortgage?
You buy a house worth $350,000 with 20% down payment and a 30-year mortgage on the remaining value. If your monthly payment is $1,500, what is the effective annual rate (EAR) for the mortgage?
You borrow $350,000 at 8 percent compounded monthly. How many years will it take to pay back the loan if the monthly payment is $2,960?
Note: Use this information for next two questions.
Ms. Patricia Sullivan plans to create a fund from her lottery winnings to meet three objectives. First, she wants to create a fund so that her mother can withdraw $20,000 per month for the remainder of her expected life of 20 years. Second, she wants to pay the down payment for her brother to buy a house upon graduation from college four years from now. She expects that he will need $100,000 for down
payment at that time. Finally, she wants to retire after 15 years and be able to withdraw $30,000 per month starting a month from her retirement. She expects to live for 30 years after retirement. All monies earn 8 percent compounded monthly and all cash flows occur at the end of the relevant period.
How much money does she need to invest today to meet her first objective?
a. $3.7 million
b. $2.4 million
c. $4.5 million
d. $3.2 million
How much money does she need to invest today to meet all three objectives?
a. $2.4 million
b. $3.2 million
c. $4.5 million
d. $3.7 million
You plan to purchase a car. The dealer is offering special financing at an annual percentage rate (APR) of 8 percent for 100 percent of the car value. The inflation premium is 3.5 percent. If the pure rate in the market is 3 percent, what is the risk premium using the multiplicative form?
The real rate is 4.2 percent and the nominal APR is 7 percent. What is the expected inflation premium? Use exact formulation.
The pure rate of interest is 2.5 percent and the inflation premium is 5 percent. If you require a risk premium of 3.5 percent, what is the nominal APR rate? Use exact formulation.
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