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bekas [8.4K]
3 years ago
11

You are looking at a one-year loan of $12,000. The interest rate is quoted as 8.4 percent plus two points. A point on a loan is

simply 1 percent (one percentage point) of the loan amount. Quotes similar to this one are very common with home mortgages. The interest rate quotation in this example requires the borrower to pay two points to the lender up front and repay the loan later with 8.4 percent interest. What rate would you actually be paying here? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Interest rate What is the EAR for a one-year loan with a quoted interest rate of 11.4 percent plus two points? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Is your answer affected by the loan amount? Yes No
Business
1 answer:
Debora [2.8K]3 years ago
5 0

Answer:

Explanation:

Mortgage rates are influenced by many different factors including demand from homebuyers and homeowners for new loans, current economic conditions, inflation, and demand from investors to buy mortgage loan debt

Mortgage interest rates have a very significant impact on the overall long-term cost of purchasing a home through financing. On the one hand, mortgage borrowers are seeking the lowest possible rates; on the other, mortgage lenders must manage their risk through the interest rates they charge. The lowest mortgage interest rates are only available to borrowers with the most solid finances and stellar credit histories.

While the financial health of borrowers affects how good an interest rate they can get, larger economic factors and government financial policy affect the whole mortgage rate universe. You can boil it down to these five important factors. All represent basic rules of supply and demand in one form or another. It's a little technical, but learning these principles will give you a good way to think about what you're paying now and what could be coming

Answer a.

Effective Annual Rate of a loan is 8.92%

Answer b.

Effective Annual rate R is 12.27%

Answer is not affected by Loan amount as certain percentage of loan that is deducted as points.

Explanation:

Answer a  

Points deducted = 2 or 2%

April = 8.4%

Monthly rate (i)= 8.4%/12= 0.007

Months in a year = 12

Effective Annual Rate of a loan =( (1+(i/(1-points)))^months in year)-1

((1+(0.007/(1-2%)))^12)-1

=0.08916311096 or 8.92%

So Effective Annual Rate of loan is 8.92%

Answer b

quoted interest rate = 11.4%

Monthly rate (i)= 11.4%/12=0.0095

Months in year = 12

points deducted= 2 or 2%

EAR of loan =((1+(i/(1-points))) ^months in year)-1

((1+(0.0095/ (1-2%))) ^12)-1

=0.1227334817 or 12.27%

Answer is not affected by Loan amount as certain % of loan is deducted as points.

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Answer:

See below

Explanation:

Total costs = Product costs + Administrative costs

= ($75 × 30,000) + $85,000 - ($50 × 30,000) + $65,000 = $3,900,000

Total cost per unit =Total cost / Units expected to be sold= $3,900,000 /30,000 = $130

Markup per unit = Total cost per unit × Markup percentage = $130.00 × 25% = $32.5

4 0
3 years ago
Why is it important that ""links live forever"" when designing an internet-based electronic commerce system?
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"Links live forever" is very important when designing commercial internet based electronic sites. Link live forever has the following 4 important reasons:

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When designing an electronic internet-based site, it is important that all the links live forever. The reasons are:

  1. Customer bookmarks: When the website is live, customers who are interested in your specific product may bookmark that page for later use. For example, customers bookmark a link that navigates them later to that page. If the link is live, then customers visit that link/page again without any hassles.  
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5 0
2 years ago
Sidewinder, Inc., has sales of $686,723, costs of $335,000, depreciation expense of $80,000, interest expense of $45,000, and a
algol13

Answer:

The addition to retained earnings is $95,751.

Explanation:

Addition to the retained earning is the net value of net earning of the year and dividend payment.

Net income

Sales                                                $686,723

Costs                                               (<u>$335,000)</u>

Gross income                                  $351,723

Depreciation Expense                   <u>($80,000)</u>

Income before interest and tax     $271,723

Interest Expense                            <u>($45,000)</u>

Income before tax                           $226,723

Tax 22%                                          <u>($49,879)</u>

Net Income                                      <u>$176,844</u>

Addition to Retained Earning = Net Income - Dividend Payment

Addition to Retained Earning = $176,844 - $81,093

Addition to Retained Earning = $95,751

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