Question: 5. A farmer needs to borrow $50,000. The local PCA will make a fouryear loan fully amortized at 12% with annual payments. A $100 loan

5. A farmer needs to borrow $50,000. The local PCA will make a fouryear loan fully amortized at 12% with annual payments. A $100 loan fee and stock purchase is required. The borrower stock requirement is the lesser of $1,000 or 2% of loan principal. Assume that sufficient money is borrowed to cover the $50,000, the fee and the stock requirement. Also assume that the stock requirement is returned to borrower when the loan is paid off and the last debt payment can be reduced by the stock amount. How much money needs to be borrowed? What is the dollar amount of the stock requirement? What is the annual loan payment? What is the actuarial, annual percentage, and the effective interest rate? (AIR, APR, i_e = 12.44%)

6. Suppose you plan to buy a house. The price of the house is $80,000. You have $10,000 for the down payment and plan to borrow $70,000 plus enough to pay for the points and closing costs. First American Bank has agreed to lend you the money. The loan will be fully amortized over 30 years at 8.0%, with 3 points. The loan payments will be monthly. The closing cost are estimated to be $2,000. Calculate the actuarial, annual percentage and effective rate on this loan if you sell the home and repay the loan at the end of the fifth year.

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