Question

Buck takes out a $235,000 mortgage at 4.3%. He plans to make monthly payments of $1,136 over the course of 30 years. What is the loan’s APR?

Answer 1

The answer should be 222,000

Answer 2

Answer:

Buck takes out a $235,000 mortgage at 4.3%.loan APR = 2.467%

Solution:

From question, given that

Amount borrowed by Buck = $235,000

Monthly payments = $1136

Duration of loan = 30 years = 30 $\times$ 12 = 360 months

Amount pay back by Buck = Monthly payments $\times$ Duration of loan  

= 360 x 1136  = $408960

$A P R=\frac{(\text { Amount paid back by Buck }-\text { Amount borrowed by Buck) } }{\text { Amount borrowed by Buck } \times \text { duration in years }} \times 100$

$=\frac{408960-235000}{235000 \times 30} \times 100=2.467$

Hence loan APR = 2.467%