Answers
Solution :
Steps followed to calculate the effective rate on loan ;
Step 1 - Monthly EMI is calculated.
Step 2 - Financial Calculator is been created in excel for 4 years
Step 3 - Total Effective rate is calculated considering 2 points initial loan avail cost and 1 percent prepayment penalty.
Effective Interest Rate = (Total Cost / 4)*100 = (97,144.57 /4)*100 = 8.10
Loan Amount $300,000.00 Interest Rate p.a. 7.5 Tenure 30 years C=(r/1-(1+r)^-N)XP C = Monthly Installment, r = monthly rate of Interest, N = Number of months, P= Principal Loan Amount) 0.00625 r=interest rate/100/12 360 N=30years x 12 2097.643526 Z Months Principal CU AWNO Financial Calculator For 48 months Interest Payment 300,000.00 300,000.00 1,875.00 2,097.64 299,777.36 1,873.61 2,097.64 299,553.32 1,872.21 2,097.64 299,327.89 1,870.80 2,097.64 299,101.04 1,869.38 2,097.64 298,872.78 1,867.95 2,097.64 298,643.09 1,866.52 2,097.64 298,411.97 1,865.07 2,097.64 298,179.40 1,863.62 2,097.64 297,945.38 1,862.16 2,097.64 297,709.89 1,860.69 2,097.64 297,472.93 1,859.21 2,097.64 297,234.50 1,857.72 2,097.64 296,994.57 1,856.22 2,097.64 296,753.14 1,854.71 2,097.64 296,510.20 1,853.19 2,097.64 296,265.75 1,851.66 2,097.64 296,019.77 1,850.12 2,097.64 295,772.25 1,848.58 2,097.64 295,523.18 1,847.02 2,097.64 295,272.56 1,845.45 2,097.64 295,020.37 1,843.88 2,097.64 294,766.60 1,842.29 2,097.64 294,511.25 1,840.70 2,097.64 294,254.30 1,839.09 2,097.64 293,995.75 1,837.47 2,097.64 293,735.58 1,835.85 2,097.64 293,473.78 1,834.21 2,097.64 293,210.35 1,832.56 2,097.64 292,945.27 1,830.91 2,097.64 292,678.53 1,829.24 2,097.64 292,410.13 1,827.56 2,097.64 292,140.05 1,825.88 2,097.64 291,868.28 1,824.18 2,097.64 291,594.82 1,822.47 2,097.64 291,319.64 1,820.75 2,097.64 291,042.74 1,819.02 2,097.64 290,764.12 1,817.28 2,097.64 290,483.75 1,815.52 2,097.64 290,201.63 1,813.76 2,097.64 289,917.75 1,811.99 2,097.64 289,632.09 1,810.20 2,097.64 289,344.65 1,808.40 2,097.64 289,055.41 1,806.60 2,097.64 288,764.36 1,804.78 2,097.64 288,471.49 1,802.95 2,097.64 288,176.80 1,801.10 2,097.64 287,880.26 1,799.25 2,097.64 88,268.75 Balance 300,000.00 299,777.36 299,553.32 299,327.89 299,101.04 298,872.78 298,643.09 298,411.97 298,179.40 297,945.38 297,709.89 297,472.93 297,234.50 296,994.57 296,753.14 296,510.20 296,265.75 296,019.77 295,772.25 295,523.18 295,272.56 295,020.37 294,766.60 294,511.25 294,254.30 293,995.75 293,735.58 293,473.78 293,210.35 292,945.27 292,678.53 292,410.13 292,140.05 291,868.28 291,594.82 291,319.64 291,042.74 290,764.12 290,483.75 290,201.63 289,917.75 289,632.09 289,344.65 289,055.41 288,764.36 288,471.49 288,176.80 287,880.26 287,581.86 48 Total Interest Paid Total Cost At The End Of 4 years Initial 2 points to avail Loan Total Interest Prepayment Penalty 1% 6,000.00 2% on 300,000 88,268.75 2,875.82 1% on 287,581.86 97,144.57 8.10 Effective Interest Rate
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