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You are purchasing a house for $120,000 with a five-year loan. The loan requires you to...

You are purchasing a house for $120,000 with a five-year loan. The loan requires you to make equal quarterly payments of $4,188.61 over the next five years and then pay off the loan with a balloon payment of $75,000. What is the nominal annual interest rate of this loan?

a) 7.15%

b) 7.00%

c) 7.75%

d) 8.00%

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Answer #1

Function Arguments RATE Nper 5*4 Pmt -4188.61 120000 Fv -75000 1 1 1 1 = 20 = -4188.61 = 120000 = -75000 Type 1 = number = 0.

Hence, nominal annual interest rate is 7.75% (1.94%*4)

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