Business, 03.07.2019 20:50 kkruvc

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 1: what is the apr on this loan?

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Answer from: madlenserlipepu1o

The annual percentage rate on the loan is 6.72%

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:

$\text{PV}=\text{PMT}\times\dfrac{1-\left ( \dfrac1{(1+r)^n} \right )}{r}$

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

$\begin{aligned} \text{2,320,000}&=\text{14,900}\times\dfrac{1-\left ( \dfrac1{(1+r)^{360}} \right )}{r}\\r&=0.560\%.\end{aligned}$

And,

Annual percentage rate = 0.560 × 12

= 6.72%

Therefore, the annual percentage rate on the loan is 6.72%.

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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