Question

Bulk Purchases just purchased a new warehouse. To finance the purchase, the firm arranged for a 25-year mortgage for 80 percent of the $1,800,000 purchase price. The monthly payment is $10,800. What is the APR? The EAR?

Answer 1

APR:

Using financial calculator BA II Plus - Input details:	#
FV = Future Value / Face Value =	$0.00
PV = Present Value of loan = 1,800,000 x 80% =	$1,440,000.00
N = Number of years remaining x frequency = 25 x 12 =	300
PMT = Payment = PMT =	-$10,800.00
CPT > I/Y = Rate = APR monthly =	0.639059
APR yearly = APR monthly x Frequency /100 = 0.639059*12/100 = 7.668713% =	7.67%

EAR:

APR = Rate = Nominal rate =	7.668713%
N = Frequency =	12
EAR = (1+Rate/N)^N - 1
EAR = (1+0.07668713/12)^12 - 1 =	7.94%