Question

# You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year...

 You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 30-year mortgage for 80 percent of the \$3,700,000 purchase price. The monthly payment on this loan will be \$17,800.
 What is the APR on this loan?
 What is the EAR on this loan?

loan amount=3700000*80%=2960000

use excel function to find the monthly rate of interest=RATE(nper,pmt,pv,fv)

nper is number of period which is 30*12=360 months

pmt is periodic payment which is 17800 in this case

pv is present value or loan amount

fv is future value

monthly rate of interest=RATE(30*12,-17800,2960000,0)=0.5023% per monthly rate

What is the APR on this loan=0.5023%*12=6.03%

What is the EAR on this loan=(1+0.5023%)^12-1=6.20%

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