You want to buy a car, and a local bank will lend you $25,000. The loan would be fully amortized over 4 years (48 months), and the nominal interest rate would be 6%, with interest paid monthly.
What is the monthly loan payment? Round your answer to the nearest cent.
What is the loan's EFF%? Round your answer to two decimal
places.
A | B | C | D | E | F | G | H | I | J |
2 | |||||||||
3 | Calculation of monthly Payment: | ||||||||
4 | |||||||||
5 | Monthly payment can be calculated using PMT(RATE,NPER,PV,FV,TYPE) function in Excel as follows: | ||||||||
6 | |||||||||
7 | Given the following data: | ||||||||
8 | Loan taken | $25,000 | |||||||
9 | Duration of mortgage | 4 | Years | ||||||
10 | Interest rate | 6.00% | |||||||
11 | |||||||||
12 | Monthly Payment can be calculated as below: | ||||||||
13 | RATE (Montly interst rate): | 0.50% | =D10/12 | ||||||
14 | NPER (No of Months): | 48 | =D9*12 | ||||||
15 | PV (Loan Amount): | -$25,000 | =-D8 | ||||||
16 | FV | 0 | |||||||
17 | TYPE | 0 | |||||||
18 | Monthly Payment | $587.13 | =PMT(D13,D14,D15,D16,D17) | ||||||
19 | |||||||||
20 | Hence Monthly Payment is | $587.13 | |||||||
21 | |||||||||
22 | Calculation of EFF%: | ||||||||
23 | EFF % is the effective annual rate (EAR) which can be calculated as follows: | ||||||||
24 | |||||||||
25 | Effective annual rate | =((1+APR/m)^m)-1 | |||||||
26 | Where APR is annual percentage rate quoted, m is compounding factor. | ||||||||
27 | |||||||||
28 | Effective interest rate being charged by bank can be calculated as follows: | ||||||||
29 | APR | 6.00% | |||||||
30 | m | 12 | (for monthly compounding) | ||||||
31 | |||||||||
32 | Effective annual rate | =((1+APR/m)^m)-1 | |||||||
33 | 6.17% | =((1+D29/D30)^D30)-1 | |||||||
34 | |||||||||
35 | Hence effective annual rate charged by the bank is | 6.17% | |||||||
36 |
You want to buy a car, and a local bank will lend you $25,000. The loan...
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