Question

Right Bank offers EAR loans of 8.98% and requires a monthly payment on all loans. What is the APR for these monthly​ loans? What is the monthly payment for a loan of

​(a​) $250,000 for 5 years,

​(b​) $450,000 for 11 ​years

​(c​) $1,450,000 for 32 years?

Answer 1

APR for Monthly loans = 12*((1+EAR)^1/12-1) =12*((1+8.98%)^1/12-1= 8.6303%

Number of Years = 12*5=60
a) Monthly Payment = PV/(1-(1+r)^-n)/r = 250000/(1-(1+8.6303%/12)^-60)/(8.6303%/12) = 5144.85
b) Number of Years =11*12 = 132
Monthly Payment = PV/(1-(1+r)^-n)/r = 450000/(1-(1+8.6303%/12)^-132)/(8.6303%/12)= 5290.91
c) Number of Years = 32*12 = 384
Monthly Payment = PV/(1-(1+r)^-n)/r = 1,450,000/(1-(1+8.6303%/12)^-132)/(8.6303%/12) = 11,139.09

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