You have just purchased a new warehouse. To finance the purchase, you’ve arrange

Question

You have just purchased a new warehouse. To finance the purchase, you’ve arranged for a 35-year mortgage loan for 85 percent of the $3,500,000 purchase price. The monthly payment on this loan will be $17,600. What is the APR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Annual percentage rate % What is the EAR on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

-2975000 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 211200 6.25% IRR(A1:A36) Steps to find APR: First we calculate IRR of this mortgage For this Annual Payment will be (17600*12 = 211200) After that we put rate of irr, no of periods and present value of this mortgage i.e 3500000*85% Calculate PMT using Excel Adjust rate using solver addin for 17600(Actual Monthly Payment) Which gives APR of 6.32% 6.32% $ -17,600.00 420 2975000 EAR = (1+r/12)^12-1 6.51% ((1+(6.32%/12))^12)-1

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