Congratulations!!! You have just taken out a 30-year mortgage on a new home. You will have to make payments of $3,500 per month for the next 30 years. The lender was kind enough to offer a low rate of...
Congratulations!!! You have just taken out a 30-year mortgage on a new home. You will have to make payments of $3,500 per month for the next 30 years. The lender was kind enough to offer a low rate of 6% .
- How much money did you borrow?
- What is the EAR of this loan?
|
$48,176.91 and 6.17% |
||
|
$583,770.65 and 0.5% |
||
|
$583,770.65 and 6.17% |
||
|
$48,176.91 and 0.5% |
Homework Answers
Money borrowed is calculated using the PV function as follows:
=PV(rate,nper,pmt)
=PV(6%/12,30*12,-3500)
=583,770.65
The effective rate is calculated as:
=(1+6%/12)^12-1
=6.17%
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