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Category > Business & Finance Posted 23 May 2017 My Price 4.00

Suppose you have agreed to a bank loan of $120,000

Suppose you have agreed to a bank loan of $120,000, for which the bank charges no fees but 2 points. The quoted interest rate

 

is .5% per month. You are required to pay only the accumulated interest each month for the next 36 months, at which point you must make a bal- loon payment of the still-owed $120,000. What is the effective interest rate of this loan?

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Alpha Geek
(8)
Status NEW Posted 23 May 2017 08:05 AM My Price 4.00

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file 1495529679-Answer.docx preview (123 words )
S-----------upp-----------ose----------- yo-----------u h-----------ave----------- ag-----------ree-----------d t-----------o a----------- ba-----------nk -----------loa-----------n o-----------f $-----------120-----------,00-----------0, -----------for----------- wh-----------ich----------- th-----------e b-----------ank----------- ch-----------arg-----------es -----------no -----------fee-----------s b-----------ut -----------2 p-----------oin-----------ts.----------- Th-----------e q-----------uot-----------ed -----------int-----------ere-----------st -----------rat-----------e -----------is -----------.5%----------- pe-----------r m-----------ont-----------h. -----------You----------- ar-----------e r-----------equ-----------ire-----------d t-----------o p-----------ay -----------onl-----------y t-----------he -----------acc-----------umu-----------lat-----------ed -----------int-----------ere-----------st -----------eac-----------h m-----------ont-----------h f-----------or -----------the----------- ne-----------xt -----------36 -----------mon-----------ths-----------, a-----------t w-----------hic-----------h p-----------oin-----------t y-----------ou -----------mus-----------t m-----------ake----------- a -----------bal------------ l-----------oon----------- pa-----------yme-----------nt -----------of -----------the----------- st-----------ill------------ow-----------ed -----------$12-----------0,0-----------00.----------- Wh-----------at -----------is -----------the----------- ef-----------fec-----------tiv-----------e i-----------nte-----------res-----------t r-----------ate----------- of----------- th-----------is -----------loa-----------n? ----------- An-----------swe-----------r: ----------- 1----------- po-----------int----------- is----------- eq-----------ual----------- to----------- 1%-----------. T-----------her-----------efo-----------re -----------2po-----------int----------- is----------- eq-----------ual----------- to----------- 2 -----------poi-----------nt.-----------
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