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# APR and EAR

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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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