Question

The next four questions are related to your purchase of your first home for $600,000. You...

The next four questions are related to your purchase of your first home for $600,000. You have just purchased the house and have put a 20% down payment, and will borrow the remaining amount. The 15-year fixed rate loan has an Annual Percentage Rate (APR) of 3.875%. You will make monthly payments for the life of the loan. Your effective interest rate is closest to which of the following? Select one: a. 3.8078% b. 3.875% c. 3.9446%. d. 4.1446% e. 4.2875%

Homework Answers

Answer #1

Solution:- Given in Question-

Annual Percentage Rate = 3.875%

Monthly Payment.

To Calculate Effective Interest Rate-

Effective Interest Rate =

Effective Interest Rate =

Effective Interest Rate =

Effective Interest Rate =

Effective Interest Rate = 1.039446 - 1

Effective Interest Rate = 0.039446

Effective Interest Rate = 3.9446%

The correct answer is point C i.e. 3.9446%

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