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    APR and EAR

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    1) You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80% of the $1 200 000 purchase price. The monthly payments on this loan will be $9 300. What is the APR on this loan? The EAR?

    2) A local finance company quotes a 13 percent interest rate on one year loans. So if you borrow $20 000, the interest would be $2 600. Because you must repay a total of $22 600 in one year, the company requires monthly payments of $1883.33 for the next 12 months. Is this a 13% loan? What rate legally would be quoted? What is the EAR?

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    Solution Preview

    3) You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80% of the $1 200 000 purchase price. The monthly payments on this loan will be $9 300. What is the APR on this loan? The EAR?

    Purchase price= $1,200,000
    80% of purchase price= $960,000
    Number of months= 360 =30*12
    Monthly payment= $9,300

    Therefore PVIFA (r%, ...

    Solution Summary

    The solution calculates APR and EAR of loans.

    $2.19

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