please explain how do you get your answers for question 52 and 53. Effective Int
ID: 2613225 • Letter: P
Question
please explain how do you get your answers for question 52 and 53.
Effective Interest Rate. First National B.ank pays 6.2% interest compounded semiannually. Second National Bank pays 6% interest compounded monthly. Which bank offers the higher and effective annual interest rate? (LO5-4) Loan Payments. You take out .an $8,000 car loan that calls for 48 monthly payments starting after 1 month at an APNR of 10% (LO5-4) What is your our monthly payment ? What is the effective annual interest rate on the loan? What if the payments are made in four annual year-end installments? what annual payment would have the same present value as the monthly payment you calculated?Explanation / Answer
52)
First National Bank
Effective Annual Interest Rate = (1+6.2%/2)^2 - 1
Effective Annual Interest Rate = 6.30%
Second National Bank
Effective Annual Interest Rate = (1+6%/12)^12 - 1
Effective Annual Interest Rate = 6.17%
First National Bank offer the higher Effective Annual Interest Rate
53)
a) Monthly Payment = pmt(rate,nper,pv,fv)
Monthly Payment = pmt(10%/12,48,-8000,0)
Monthly Payment = $ 202.90
b)
Effective Annual Interest Rate = (1+10%/12)^12 - 1
Effective Annual Interest Rate = 10.47%
c)
Annual Payment = pmt(rate,nper,pv,fv)
Annual Payment = pmt(10.47%,12,-8000,0)
Annual Payment = $ 1201.27
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