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# EAR, monthly payment, refinance mortgage

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1) You have found three investments choices for a one-year deposit: 10% APR compounded monthly, 10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.)

2) Oppenheimer Bank is offering a 30-year mortgage with an EAR of 5 3/8%. If you plan to borrow \$150,000, what will your monthly payment be?

3) You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage. The current monthly payment is \$2356 and you have made every payment on time. The original term of the mortgage was 30 years, and the mortgage is exactly four years and eight months old. You have just made your monthly payment. The mortgage interest rate is 6 3/8% (APR). How much do you owe on the mortgage today?

#### Solution Preview

The answers are also in the attached file:
1) You have found three investments choices for a one-year deposit: 10% APR compounded monthly, 10% APR compounded annually, and 9% APR compounded daily. Compute the EAR for each investment choice. (Assume that there are 365 days in the year.)

1) Compounded monthly
APR (Annual percentage rate)= 10.00%
Frequency= M Monthly
No of Periods in a year= 12
Interest rate per period= 0.8333% = 10.%/12
EAR (Effective annual rate)= 10.47% =(1+0.008333) ^ 12-1

2) Compounded annually
APR (Annual percentage rate)= 10.00%
Frequency= A Annual
No of Periods in a year= 1
Interest rate per period= 10.0000% = 10.%
EAR (Effective annual ...

#### Solution Summary

Calculates effective annual rate of interest, monthly payment for a mortgage and answers a question on refinancing of a mortgage.

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