Question

Bulk Purchases just purchased a new warehouse. To finance the purchase, the firm arranged for a...

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?

Homework Answers

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%

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