Consider the following monthly amortization schedule: Payment # Payment Interest Debt Payment Balance 1 1,167.34 540.54 626.80 259,873.20 2 1,167.34 539.24 628.10 259,245.10 3 1,167.34 x y z With the exception of column one, all amounts are in dollars. Calculate the annual interest rate on this loan. Give your answer to the nearest hundredth percent. Do not include the % sign in your response.

First you have to understand that the payment includes Payment Interst plus Debt Payment and that the Payment Balance is the Loan Amount minus the Debt Payment; with this information you calculate the Loan Amount that is 260,500.00 and calculate the rate per month (use the interest debt / Loan Amount) which results in 0.2075 percent (TEM). To calculate the annual interest rate you use the formula to convert to TEA which is ((1+TEM)^12)-1).

meadow10176 meadow10176 · Answer 2 · 2020-11-12T04:06:11+01:00

Answer:

$629

Explanation:

The loan principal can be calculated from row one, and is

$259,873.20 + $626.80 = $260,500.

Also from row one we know that

$260,500 × [tex]\frac {r}{12}[/tex] = $540.54,

which gives r = 0.0249 = 2.49%. We can calculate x as

$259,245.10 × [tex]\frac{2.49 percent}{12}[/tex] = $537.93,

and therefore y, the amount that's deducted from the balance in month 3 is

y = $1,167.34 − $537.93 = $629.41

which is $629 to the nearest dollar.