Mr. Rich arranged for a mortgage loan for 65 percent of the $2.5 million purchase price of a home. The monthly payment will be $10,400 and the mortgage term is 30 years. What is the EAR on this loan?

Question

Quizplus · Accepted Answer

The EAR on this loan is 6.82 percent. This can be calculated using the following formula:EAR = (1 + (APR/12))^12 - 1where APR is the annual percentage rate.In this case, the APR is 6.5%, so the EAR is:EAR = (1 + (0.065/12))^12 - 1 = 0.0682 or 6.82%

Mr Rich Arranged for a Mortgage Loan for 65 Percent