Question

1) Loan amortization and EAR You want to buy a car, and a local bank will lend you $10,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 11% with interest paid monthly. What will be the monthly loan payment? Round your answer to the nearest cent. $ What will be the loan's EAR? Round your answer to two decimal places. %

2)

Effective rate of interest

Find the interest rates earned on each of the following. Round each answer to two decimal places.

1. You borrow $710 and promise to pay back $781 at the end of 1 year.

   %

2. You lend $710 and the borrower promises to pay you $781 at the end of 1 year.

   %

3. You borrow $86,000 and promise to pay back $370,698 at the end of 14 years.

   %

4. You borrow $20,000 and promise to make payments of $6,687.60 at the end of each year for 5 years.

   %

Answer 1

1

PVOrdinary Annuity = C*[(1-(1+i/(f*100))^(-n*f))/(i/(f*100))]

C = Cash flow per period

i = interest rate

n = number of payments I f = frequency of payment

10000= Cash Flow*((1-(1+ 11/1200)^(-5*12))/(11/1200))

Cash Flow = 217.42

Using Calculator: press buttons "2ND"+"FV" then assign

PV =-10000

I/Y =11/12

N =5*12

FV = 0

CPT PMT

Using Excel

=PMT(rate,nper,pv,fv,type)

=PMT(11/(12*100),12*5,,10000,)

EAR = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

? = ((1+11/(12*100))^12-1)*100

Effective Annual Rate% = 11.57

Please ask remaining parts seperately, questions are unrelated