You are reviewing an advertisement by a finance company offering loans at an annual percentage rate of 9%. If the interest is compounded weekly, what is the effective interest rate on this loan?

 
6. You are comparing houses in two towns in New Jersey. You have $100,000 to put as a down payment, and 30-year mortgage rates are at 8% -
                                               Chatham     South Orange
The price of the house is      $ 400,000      $ 300,000
Annual Property Tax               $ 6,000       $ 12,000
The houses are roughly equivalent.
a. Estimate the total payments (mortgage and property taxes) you would have on each house. Which
one is less expensive?
b. Are mortgage payments and property taxes directly comparable? Why or why not?
c. If property taxes are expected to grow 3% a year forever, which house is less expensive?
 

Answer rating: 100% (QA)

To find the effective interest rate we need to use the formula Effective annual interest rate 1 nominal interest rate number of compounding periods nu... View the full answer