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Mariulka [41]
3 years ago
11

Your boss has decided to let you telecommute, meaning that you can move to the Ohio River Valley and live extremely cheaply ...

starting with a house that you can buy for $45,975.00. Your friendly loan officer at Marietta Community Bank informs you that the monthly payment on your 9-year loan will be $752.50. (Payments are end-of-month.) What is the effective annual rate (EAR) on this loan
Business
1 answer:
enyata [817]3 years ago
6 0

Answer:

15%

Explanation:

This is a time value of money question which requires the calculation of the effective annual rate (EAR) on the loan.

First calculate the <em>interest rate</em> of the loan that is <em>compounded monthly</em> using the given parameters as follows :

Pv = $45,975.00

N = 9 × 12 = 108

Pmt = - $752.50

P/yr = 12

Fv = $ 0

i = ?

Interest Compounded Monthly = 14.0579 %

Effective = 15% (using a financial calculator)

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