Answer:
Effective annual rate = 6.82 %
Explanation:
given data
loan = 65 % of $2.5 million = $1625000
monthly payment pmt = $10,400
time = 30 year = 30 × 12 = 360
solution
we get here rate first by present value
present value = pmt × [tex]\frac{1-(1+r)^{-t}}{r}[/tex] ..........1
$1625000 = $10400 × [tex]\frac{1-(1+r)^{-360}}{r}[/tex]
15.625 = [tex]\frac{1-(1+r)^{-360}}{r}[/tex]
solve it we get
r = 0.5517%
and Effective annual rate will be
Effective annual rate = [tex](1+r)^{12} -1[/tex]
Effective annual rate = [tex](1+0.005517)^{12} -1[/tex]
Effective annual rate = 0.068250
Effective annual rate = 6.82 %
