a) Mark Brown receives a S2000 loan with the intention of repaying the loan in 1
ID: 2786229 • Letter: A
Question
a) Mark Brown receives a S2000 loan with the intention of repaying the loan in 12 months. However, at the end of one month, Mr. Brown discovers he can repay the loan in full. What percentage of the interest charge is Mr. Brown entitled to receive as a rebate? Answer: 63.33 percent b) Mark Brown requests an automobile loan of $15,000 that will be repaid over the next four years in monthly repayments. The First National Bank tells Mr. Brown that his total finance charges will be S4675.20. What is the APR on this loan? Answer: 14 percent c) Mark Brown has asked for a 30-year mortgage to purchase a home in Oklahoma City Oklahoma. The purchase price of the home is S150,000 of which S125,000 must be borrowed. If the APR on this loan is 8 percent, how much will Mr. Brown total financing charges be? Answer: S205,194Explanation / Answer
b) Monthly payment = (Principal + Interest) / No. of months = (15,000 + 4675.20) / 48 = 409.9
On a financial calculator, insert N = 4 x 12 = 48, PMT = 409.9, PV = -15000, FV = 0 => Compute I/Y = 1.17% (monthly rate)
Annualized rate = 1.17% x 12 = 14%
c) Monthly payment can be calculated using PMT function
N = 30 x 12 = 360, PV = 125,000, FV = 0, I/Y = 8%/12 => Compute PMT = $917.21
Total payment over the life of the loan = $917.21 x 360 = $330,194
Total Financing Charges = Total Payment - Principal = 330,194 - 125,000 = $205,194
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.