Question

A $53,000 loan is taken out on a boat with the terms 3% APR for 36 months. How much are the monthly payments on this loan? O A. $1,849.56 OB. $1,695.43 O C. $1,541.30 O D. $2,003.70

Answer 1

Monthly Payment = Loan Amount/PVAF(r%, n periods)

= 53,000/PVAF(0.25%, 36 periods)

= 53,000/34.386465

= $1,541.30

i.e. C.

Value of perpetuity after 4 years = 700/7% = $10,000

Value of perpetuity today = 10,000/(1.07)⁴

= $7,629

i.e. D

(1+Nominal rate) = (1+Real Rate)(1+Inflation rate)

(1+8.5%) = (1+Real Interest rate)(1+4.5%)

Real rate = 3.8%

i.e. A.