Question

You have just purchased a new warehouse. to finance the purchase, you've arranged for a 30-year mortgage loan for 80 percent of the $4,000,000 purchase price. the monthly payment on this loan will be $18,100. what is the apr on this loan? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.) annual percentage rate % what is the ear on this loan?

Answer 1

EAR is the Effective Annual Rate on loan. It is an amount charged on loan taken by the borrower. Since there are monthly payments made of $18,100 on this loan, it is the problem related to annuity. Annuity means any periodic payments are made at regular intervals, this is the case of present value of annuity.

STEP 1: The present value of annuity can be found by using the rate option in excel.

In excel we have the rate option as :

=Rate(nper,pmt,pv,fv,type)

where, Rate = Rate of interest

NPER = number of payment in a period

PMT = Periodic payment made

PV = Present Value

FV = Future Value

Type = 0 if it is at the end of the period and 1 if the payment starts at the beginning of the period.

STEP 2: Identify the variables given:

NPER = 30 × 12 = 360

PMT = $18,100

PV = $4,000,000 × 80% = $3,200,000

FV = 0

Type = 0 (When nothing is mentioned, it is assumed that the payments are made at the end of the month.

STEP 3: Insert the variables identify in the formula shown in STEP 1 in excel:

=rate(360,18100,-3200000)

=0.046%

STEP 4: The rate is 0.46% is the monthly rate, the Effective annual rate (EAR) on this loan will be:

$EAR = (1+0.00046)^{360} - 1$
$EAR = (1.00046)^360 - 1$

EAR = 1.177934813 - 1

EAR = 0.177934813 or 17.79%

Therefore, the effective annual rate (EAR) on the loan is 17.79%

Answer 2

Answer:

Please see attachment

Explanation:

Please see attachment