1. You plan to buy a $193952 house. You have $33583 to use as the down payment.
ID: 1208891 • Letter: 1
Question
1. You plan to buy a $193952 house. You have $33583 to use as the down payment. The bank offers to loan you the remainder at 18% nominal interest compounded monthly. The term of the loan is 20 years. What is your equal monthly loan payment?
2.Scooter wishes to sell a bond that has a face value of $1006. The bond bears an interest rate of 16.64% with bond interest payable quarterly. Three years ago, $1409 was paid for the bond. At least a 21.43% return (yield) on the investment is desired.
3.M. Poirot wishes to sell a bond that has a face value of $1,000. The bond bears an interest rate of 8.23% with bond interest payable semiannually. Six years ago, $1448 was paid for the bond. At least a 12% return (yield) on the investment is desired. The minimum selling price must be:
Explanation / Answer
Q1. Cost = $193,952
Downpayment = $33,583
Loan taken (P) = $193,952 - $33,583 = $160,369
Interest rate = 18% or 0.18
Since, interest rate is compounded monthly, we have to divide it by 12.
r = 0.18/12 or 0.015
Time = 20 years
As payments are monthly total (20*12) 240 periods of monthly payment are there.
n = 240
Calculate Equal Monthly Loan Payment -
EMI = P * [r/(1 - (1+r)-n)]
EMI = $160,369 * [0.015/(1 - (1 + 0.015)-240)]
EMI = $160,369 * [0.015/(1 - 0.028)]
EMI = $160,369 * [0.015/0.972]
EMI = $160,369 * 0.0154
EMI = $2,469.68
The Equal Monthly Loan Payment is $2,469.68
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