1. Suppose you borrow $20,000 at an 18 percent simple interest. You must repay your loan in 24 months. a. What is your total interest expense (under the simple interest rate method)? b. What is the effective yield? 2. Suppose you borrow $20,000 at an 18

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  • Suppose you borrow $20,000 at an 18 percent simple interest. You must repay your loan in 24 months.
    • What is your total interest expense (under the simple interest rate method)?
    • What is the effective yield?
  • Suppose you borrow $20,000 at an 18 percent simple interest but must repay your loan in 12 equal monthly payments.
    • Find the APR for this loan.
    • What is the corresponding EAR?
  • Suppose you deposit $20,000 in a savings account. After 210 days, you withdraw your funds. If the bank paid you $340 in interest for the 210-day period, what is your APY?
  • Suppose that the house of your dreams costs $1,200,000. You manage to scrap a 20 percent down payment. You borrow the rest from a bank. The terms of the loan are:
  • 30 years
  • 4.5 percent
  • Monthly payments
    • Find the amount of each monthly payment.
    • Suppose you decide to sell the house after 12 years:
      • What is the loan balance at the end of 12 years?
      • What is the amount of your total payments over the 12 years?
      • What is the amount of your total principal payments over the 12 years?
      • What is the amount of your total interest payments over the 12 years?
    • Use Excel to set up an amortization table. ( MUST SEE EXCEL)

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