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    Car loan's monthly payment and EAR

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    You want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over 5 years ( 60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR?

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    The monthly loan payment would be such that the present value is equal to the loan amount. The monthly loan payment would be an annuity and so we use the PV ...

    Solution Summary

    The solution explains how to calculate the car loan's monthly payment and EAR