Question

You want to buy a car, and a local bank will lend you $25,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 4% with interest paid monthly a. What will be the monthly loan payment? Round your answer to the nearest cent. b. What will be the loan's EAR? Round your answer to two decimal places.

Answer 1

А 561 question 562 loan for car 25000 563 period months 564 rate 4% APR 565 MONTHL RATE 0.33% 4%/12 566 567 MONLY loan payment $460.41 568 =PMT(0.3333%,60,-25000,,0) 569 570 EAR =((1+0.3333%)^12)-1 571 4.07% 572

23 YEARS 574 REQUIRED INTEREST RATE 575 PERIOD 576 577 CURRENT VALUE 330,000.00 578 FUTURE VALUE 1,250,000.00 579 INTEREST RATE 5.96% 580 586 581 FUTURE VALUE ORDINARY ANNUITY 582 RATE 4% 583 PERIOD YEARS 584 PMT 600 585 FUTURE VALUE --FV(4%,5,,600,0) $3,249.79 587 FUTURE VALUE ANNUITY DUE 588 --FV(4%,5,600,,1) 589 $3,379.79 590 591 the diffference between ordinary annuity and annuity due is that 592 in first case it is due at the end of the peroid and other 593 case it is due at the starting of the period.

6000 595 FUTURE VALUE 596 present value 597 rate 598 period 599 future value 5% years =FV(5%,5,,-6000,1) $7,657.69 500 501

502 FUTURE VALUE 503 A ORDINARY ANNUITY ANNUITY DUE 504 PMT 800, PERIOD 16, RATE 4% 505 =FV(4%,16,-800,,0) =FV(4%,16,-800,,1) 506 17,459.62 $18,158.01 507 B 508 PMT 400, PERIOD 8, RATE 2% 509 =FV(2%,8,-400,,0) =FV(2%,8,-400,,1) 510 $3,433.19 $3,501.85 511 C 512 PMT 300, PERIOD 12, RATE 0% =FV(0%, 12,-300,,0) =FV(0%,12,-300,,1) 514 $3,600.00 $3,600.00 513

616 a intial 400 for 1 year @8% 1617 =P*(1+R%)^N 1618 -400*(1+8%)^1 619 432 620 621 B INITIAL 400 for 2 years @8% 622 =P*(1+R%)^N 623 -400*(1+8%)^2 466.56 625 626 c given present value 400 period 1 discount rate 8% 624 =fv/((1+R%)^N) 370.37 630 631 c given present value 400 period 2 discount rate 8% 627 628 629 632 633 634 -400/((1+8%)^2) 342.94

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