You have just purchased a new warehouse. to finance the purchase, you’ve arranged for a 30-year mortgage loan for 80 percent of
2 answers:
<u>The annual percentage rate on the loan is 6.72% </u>
Further Explanation:
Annual Percentage Rate: It measures the rate of return earned on the investment or Rate charged on the loan.
Calculate the Annual percentage rate:
To calculate the APR we will calculate the present value of the annuity stream:
Where,
PV = the present value of an annuity stream
PMT = the annual future payment
r = the interest rate or the discount rate
n = the number of periods
And,
Annual percentage rate = 0.560 × 12
= 6.72%
<u>Therefore, the annual percentage rate on the loan is 6.72%. </u>
Working Notes:
Amount Borrowed = $2,900,000 × 0.80
=$2,320,000
Learn more:
1. Learn more about the lifetime cost of the loan along with interest
2. Learn more about the interest on credit card
3. Learn more about compound interest
Answer details:
Grade: High School
Subject: Financial Management
Chapter: Time value of money
Keywords: You have just purchased a new warehouse. to finance the purchase, you’ve arranged for a 30-year mortgage loan for 80 percent of the $2,900,000 purchase price, the monthly payment on this loan will be $14,900. Requirement, what is the apr on this loan.
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