A house costs $138,000.It is to be paid off in exactly ten years,with monthly payments of $1675.What is the APR of this loan?

Question

Quizplus · Accepted Answer

To find the APR, we need to use the formula:

PV = Pmt x ((1-(1+i)^(-n))/i)

Where:
PV = present value (amount of the loan)
Pmt = monthly payment
i = monthly interest rate
n = number of payments

Plugging in the values given in the problem, we get:

138,000 = 1,675 x ((1-(1+i)^(-120))/i)

Solving for i using a financial calculator or trial and error, we get i = 0.0066667, or 0.66667%. Multiplying by 12 to get the annual percentage rate, we get an APR of 8.00%. Therefore, the best choice is C) 8.00%.

A House Costs $138,000