Answered: Cheng obtain an 8 year subsidized loan…

Cheng obtain an 8 year subsidized loan of $5,000 at an annual interest rate of 3.9% and must pay a loan fee of 0.98%. What is he a APR (in percent) for Cheng’s loan.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 6FPE

See similar textbooks

Related questions

Q: What is Qualitative Asset transformation (QAT) and how does it facilitate financial intermediation…

A: QAT is an important concept related to banks and financial institutions. QAT, as the name indicates,…

Q: a) Calculate the after-tax cost of borrowing from the boat dealership. b) Calculate the after-tax…

A: Interest rates are the rates at which borrowers can obtain funds from lenders. Different types of…

Q: a) Who is the lender and who is the borrower when a newly issued bond is purchased? b) You just…

A: Bonds are debt instruments issued by companies. A company issues bond to raise funding or capital…

Q: Compute the principal (in $) for the loan. Use ordinary interest when time is stated in days. Rate…

A: Ordinary interest, also known as simple interest, is a method of calculating interest on a loan or…

Q: Which credit risk management model can help to resolve Washington Mutual credit risk issues

A: Washington Mutual, one of the largest banks in the United States, experienced significant credit…

Q: brought a sum of money for his trip. On the first day, he spent of his mo misplaced $4. On the…

A: When doing expenses, the left over money at the end must be equal to the initial money less all…

Q: A company is considering a new water bottling plant. Business plan forecasts an internal rate of…

A: The CAPM model states that systematic risk is a good indicator of the expected return that a stock…

Q: Your company has the following expected dividends over the next 6 years: $2.00, $2.40, $3.20, $3.60,…

A: Present value is the estimation of the current value of future return which is likely to be received…

Q: Calculate the utility levels of each portfolio for an investor with A = 3. Assume the utility…

A: First let us list the formulas that we will be using to solve this question. Return of index =…

Q: olem 4.a: A hydraulic crane service company had sales revenue of $2, operations during tax-year 1.…

A: Taxable income Taxable income is the income on which the tax rate is applied. When tax expense is…

Q: Kilroy Enterprises' bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon…

A: In the given case, we have provided the current selling price of bond along with par value of bond.…

Q: Marin Company's bonds mature in 8 years, have a par value of $1,000, and make an annual coupon…

A: Time = t = 8 years Face value = fv = $1000 Coupon payment = c = $65 Interest rate = r = 6%

Q: Suppose you are a hedge fund. You are trying to form a portfolio out of 2 risky assets and a…

A: The tangency portfolio calculation involves solving an optimization problem, where the aim is to…

Q: Year 1 23 4 Current (Long-term) Rates % % 555 % %

A: Under unbiased expectations theory, the long-term rates are the geometrical average of the…

Q: I BOND VALUATION An investor has two bonds in his portfolio that have a face value of $1,000 and pay…

A: 7-5; a. At 5% Price of Bond L = 100/1.05 +100/1.05^2 +100/1.05^3 .........1100/1.05^15 =1,518.98…

Q: Nick borrowed $6000 for 24 months from his bank using an 11 and a 1/2 percent discount note. A.…

A: Borrowing money has a cost—interest payments. These installments are made by the borrower in…

Q: An investor uses £150,000 to buy 6-year bonds with a face value of £100. The bonds pay coupons…

A: Bond Price: The discounted present value of the future cash flow that a bond will generate is what…

Q: You deposit $137987 at 4.6% per year in a saving account. What is the interest at the end of one…

A: Under compound interest, the interest will be calculated on the interest earned and the deposit…

Q: a. What was the balance in the fund at the end of the period? Round to the nearest cent b. What was…

A: The future value of the annuity due is the future worth of a cash flow series received or paid at…

Q: Arco Industries has a bond outstanding with 15 years to maturity, an 8.25% nominal coupon,…

A: Price of the bond is the PV of its future coupons and par value discounted at the YTM. A bond that…

Q: Suppose that the yield on a two-year Treasury security is 5.84%, and the yield on a five-year…

A: Under expectation theory, we can determine the future rates using the spot rates as the term…

Q: Your uncle told you that he would give you his coin collection. He just got it appraised and it is…

A: Future Value: It represents the expected value of the present sum of the amount in the future. It…

Q: Consider the following variance-covariance matrix for Security A, Security B, and the Market:…

A: The portfolios with the best balance of risk and return are shown on the capital market line. It is…

Q: Elijah has $30,000 in his RRSP account and wants this to accumulate to $250,000. The account is…

A: Here,

Q: 1. ΔRoR for the first increment (Alt. C-Alt. A) is ___________________. 2. ΔRoR for the second…

A: To solve this problem, we need to calculate the incremental rate of return (IRR) for each of the two…

Q: A * 1,000 par value ten-year bond with coupons at 8% convertible semiannually will be redeemed for…

A: To prove that the value of R is *799.89, we can use the formula for the present value of a bond: PV…

Q: Why is it more important to use discounted net cash flows for typical mining projects versus typical…

A: Discounted net cash flows are used to evaluate the economic feasibility of a project by calculating…

Q: Moody Corporation's bonds have a 15-year maturity, a 7.25% coupon paid semiannually, and a par value…

A: Bond Price: The price of a bond is computed by discounting the expected coupon payments and the par…

Q: £1443 paid at the end of each year for the first 4 years followed by £1441 paid at the end of each…

A: Annual payment for first 4 years = £1443 Annual payment for 15 years (including first 4 years) = p =…

Q: Calculate the missing information for the installment loan that is being paid off early. Number of…

A: Early settlement refers to the completion of a finance package or arrangement before the…

Q: Vigour Pharmaceuticals Ltd. is considering investing in a new production line for its pain-reliever…

A: The cash flow generated by terminating and liquidating a project at the conclusion of its economic…

Q: A $180,000 mortgage is to be amortized by making end of the month payments for 25 years. Interest is…

A: Information Provided: Mortgage amount = $180,000 Period of mortgage = 25 years Interest rate =…

Q: A hrm has EBIT of $15,800,000.00, total assets of $100,000,000.00, a tax rate of 40 percent, a cost…

A: Step 1 When a company uses borrowed funds to operate, it is said to be leveraged. In contrast, a…

Q: The Highway Department expects the cost of maintenance for a piece of heavy construction equipment…

A: Present value is the estimation of the current value of future cash value which is likely to be…

Q: An unpaid credit card bill for $656.95 had a due date of May 8. Purchases of $385 were made on May…

A: Here, Interest Rate is 1.4%

Q: obert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has…

A: The answer are given below

Q: What types of returns do mutual funds and ETFs generate? What are their tax implications?

A: Mutual funds are managed by professional fund managers who invest the pooled money in a variety of…

Q: Your brother plans to start investing. He will invest $804 today; $991 in 2 year and $1294 in 6…

A: The concept of time value of money will be applied here. Money invested today grows in future due to…

Q: How much can be paid in scholarships at the end of each half-year if $210,000 is deposited in a…

A: Interest can provide a range of benefits for investors, particularly those looking for a steady…

Q: You are borrowing $250,000 to buy a house, using a standard, 30-year mortgage. Your mortgage lender…

A: A mortgage is a covered loan taken out to purchase a property with the property itself acting as…

Q: Melissa Gutt is thinking about buying some shares of EZLawn Equipment, at $41.63 per share. She…

A: Intrinsic Value: It represents the actual worth of financial security. One of the common ways of…

Q: You are running an active strategy and you are told by your boss to use a universe of 100 market…

A: Main steps of building a multivariate regression model using a universe of 100 market drivers to…

Q: Portfolio A returned 9.20% p.a. over the evaluation period compared to 5.00% p.a. for the S&P 500.…

A: Portfolio A and S&P 500 are two different investment portfolios with different combinations of…

Q: Use the TVM Solver to find the present value of an ordinary annuity where the payments are $4210…

A: Present value is a financial concept that represents the value of a future sum of money in terms of…

Q: A debt of $31,000 is repaid over 8 years with payments occurring semi-annually. Interest 4%…

A: To solve this question, we first need to determine annual equivalent yield as the compounding period…

Q: Apollo Corporation is a private equity firm that focuses on reusable energy projects. Its major…

A: As per the given information: Debt percentage in capital structure - 40%Common equity percentage in…

Q: The amount of a firm's leverage is irrelevant because...

A: This is related to the concept of homemade leverage. It should be noted that homemade leverage is…

Q: nvestments has a 4% chance of a loss of $10 million, a 2% chance of a loss of $1 million, and a 94%…

A: VaR Value at risk (VaR) is a measure of risk. It identifies the chance of occurring the specific…

Q: Suppose the spot and six-month forward rates on the Norwegian krone are NKr 9.14 and NKr 9.27,…

A: In finance, the spot rate refers to the current market price of an asset or financial instrument,…

Q: 3. At the end of each quarter, $4,000 is placed in an annuity that ears 6% interest, compounded…

A: payments made at fixed intervals over a specified period of time. These payments are made to an…

Concept explainers

Calculating the Return On A Loan

Question

Cheng obtain an 8 year subsidized loan of $5,000 at an annual interest rate of 3.9% and must pay a loan fee of 0.98%. What is he a APR (in percent) for Cheng’s loan. Round your answer to the nearest hundredth of a percent.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction,

VIEW

Calculation of the APR is as follow:

VIEW

Answer

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Eli pay on the loan if it is held for the full five-year term? b. What are Elis monthly payments? c. How much higher are the monthly payments under the add-on method than under the simple interest method?
Calculating single-payment loan amount due at maturity. Stanley Price plans to borrow 8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Stanley have to pay in five years? How much will he have to pay at maturity if hes required to make annual interest payments at the end of each year?
Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
Next Level Potter wishes to deposit a sum that at 12% interest, compounded semiannually, will permit 2 withdrawals: 40,000 at the end of 4 years and 50,000 at the end of 10 years. Analyze the problem to determine the required deposit, stating the procedure to follow and the tables to use in developing the solution.
Chris Jenkins is borrowing $11,500 for 5 years at 10 percent. Payments are made on a monthly basis, which are determined using the add-on method. How much total interest will Chris pay on the loan if it is held for the full five-year term? What are Chris' monthly payments? Round the answer to the nearest cent. How much higher are the monthly payments under the add-on method than under the simple interest method (determined using a calculator or approximated using Exhibit 7.6)? Round the answer to the nearest cent.
Steven Riley is borrowing $9,000 for 5 years at 8 percent. Payments are made on a monthly basis, which are determined using the add-on method. How much total interest will Steven pay on the loan if it is held for the full 5-year term? $ What are Steven's monthly payments? Round the answer to the nearest cent. $ per month How much higher are the monthly payments under the add-on method than under the simple interest method (determined using a calculator or approximated using Exhibit 7.6)? Round the answer to the nearest cent. $ per month
Lea borrows PhP 100,000 at an annual effective interest rate of 4% and agrees to repay it with 30 level annual instalments paid at the end of each year. At the end of 10 years, Lea has the option to repay the entire loan with a final payment X, in addition to the regular payment. This will yield the lender an annual effective interest rate of 4.5% over the 10 year period. Calculate X.
Fernando has the choice of taking out a 25-year loan for $150,000 at 6.6% interest, compoundedmonthly, or the same loan at 20 years for a higher monthly payment. How much more is the monthlypayment for the 20-year loan than the monthly payment for the 25-year loan?
Moon purchases a lot for $300,000. Moon agrees to pay $25,000 dollars at the end of each year. If the interest rate is 4% compounded annually, how many full payments must be made, and what will be the size of the concluding payment one year after the last full payment? How to enter into TVM Solver??
Mr. Nina borrows $425,000 from the bank at 3.5% per year interest over a 30-year period. He can make a monthly month-end payment of $1,400 and would like to make a balloon payment at the end of the 30-year period. What would be the size of the balloon payment? $218,058 $323,069 $433,197 $548,512 Please show how to work this out in Excel if possible?
Paul obtains a 30-year loan at an annual 7.4% on a $250,000 house where the required down payment is 15% of the house value. What is Paul’s monthly mortgage payment (rounded to the nearest dollar)?