Question

14) 14, You are considering purchasing a new home. You will need to borrow $270,000 to purchase the home. A mortgage company offers you a 20-year fixed rate mortgage at 6% APR. If you borrow the money from this mortgage company, your monthly mortgage payment will be closest to: A) S3094 B) $1934 C) SI547 D) $2708 15) 15. A bank offers a loan that will requires you to pay 8% interest compounded semiannually. Which of the following is closest to the EAR charged by the bank? A) 16.32% B) 9.79% C) 6.53% D) 8.16% 16 A 10% APR with quarterly compounding is equivalent to an EAR of A) 9.81% B) 10.47% C) 10.00% D) 10.38% 17) 17, A house costs $143,000. It is to be paid off in exactly ten years, with monthly payments of $1708.65, What is the APR of this loan? A) 8.65% B) 7.65% C) 6,65% D) 5.65% 18) 18) A pottery factory purchases a continuous belt conveyor kiln for $45,000. A 8.6% APR loan with monthly payments is taken out to purchase the kiln. If the monthly payments are $560.35, over what term is this loan being paid? A) 9 years B) 11 years C) 10 years D) 8 years

Answer 1

Solution to QUESTION-14

Monthly mortgage payment

Loan Amount (P) = $210,000

Monthly Interest Rate (n) = 0.50% per month [6.00% / 12 Months]

Number of months (n) = 240 Months [20 Years x 12 months]

Therefore, the Monthly Mortgage Payment = [P x {r (1 + r)ⁿ} ] / [(1 + r)ⁿ – 1]

= [$210,000 x {0.005 x (1 + 0.005)²⁴⁰}] / [(1 + 0.005)²⁴⁰ – 1]

= [$210,000 x {0.005 x 3.310204476}] / [3.310204476 – 1]

= [$210,000 x 0.016551022] / 2.310204476

= $4,468.78 / 2.310204476

= $1,934 per month

“Hence, the Monthly Mortgage Payment will be (B). $1,934”