Answer:
The effective annual rate of interest on the additional $25,000 borrowed on the first loan is 12.95%
Explanation:
the loan amount is $250,000 and the period is 20 years.
1.
down payment of $50,000 and the interest rate is 6% per annum
the loan amount = $250,000 - $50,000
= $200,000
period = 20*12
= 240 months
rate = 5%/12
= 0.4167% per month
monthly payment = $1,319.91
difference between the payments in 1 and in 2 = 1611.97 - 1319.91
= $292.06
additional down payment is $25,000
2.
down payment of $25,000 and the interest rate is 6% per annum
the loan amount = $250,000 - $25,000
= $225,000
period = 20*12
= 240 months
rate = 6%/12
= 0.5% per month
monthly payment = $1,611.97
difference between the payments in 1 and in 2 = 1611.97 - 1319.91
= $292.06
additional down payment is $25,000
the effective annual rate = [(292.06/25000)*12]*100
= 12.95%
Therefore, The effective annual rate of interest on the additional $25,000 borrowed on the first loan is 12.95%
