Karana takes out a conventional loan to purchase a car. The interest rate is 6.4

Question

Karana takes out a conventional loan to purchase a car. The interest rate is 6.4% compounded monthly and Karana has ten years to repay the $27,000 she borrowed. What are Karana's monthly payments? How much would you have to invest each month in an annuity earning 5% monthly to earn $5000 at the end of 18 years? A credit card bill shows a balance due of $12000 with a minimum payment of $24 and a monthly interest rate of 1.44%. What is the EAR? Which of these loan rates is most favorable? How much would you have to invest each quarter in an annuity earning 5% quarterly to earn $20,000 at the end of 20 years?

Explanation / Answer

Question 18. Answer 17.28%

Monthly nterest rate = 1.44%

so Effective Annual Rate = 1.44 x 12 = 17.28%

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