AQR Assignment 15.4 Finance

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 1: a 30-year loan at an APR of 8%

1) What is the Monthly Payment (PMT)?

• $147

• $157

• $137

• $167

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 1: a 30-year loan at an APR of 8%

2) What is the total amount paid (PMT*n*Y)?

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 1: a 30-year loan at an APR of 8%

3) What is the total paid in interest (Total amount paid – P)?

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 2: a 15-year loan at 7.5%

4) What is the Monthly Payment (PMT)?

• $185

• $165

• $175

• $195

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 2: a 15-year loan at 7.5%

5) What is the total amount paid (PMT*n*Y)?

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 2: a 15-year loan at 7.5%

6) What is the total paid in interest (Total amount paid – P)?

You need a $20,000 loan. Compare the monthly costs and the total loan costs for the options below. Assume that both loans are fixed rate and have the same closing costs. Round to the nearest dollar amount (no decimal places).

Option 1: a 30-year loan at an APR of 8%

Option 2: a 15-year loan at 7.5%

7) Explain which loan you would prefer.

Suppose you have the following three student loans:

Loan 1: $10,000 with an APR of 6.5% for 15 years

Loan 2: $15,000 with an APR of 7% for 20 years

Loan 3: $12,500 with an APR of 7.5% for 10 years.

Use the Loan Payment Formula to calculate the monthly payment for each loan individually. Round to the nearest dollar amount (no decimal places).

8) Loan 1 PMT:

• $87

• $77

• $97

• $107

Suppose you have the following three student loans:

Loan 1: $10,000 with an APR of 6.5% for 15 years

Loan 2: $15,000 with an APR of 7% for 20 years

Loan 3: $12,500 with an APR of 7.5% for 10 years.

Use the Loan Payment Formula to calculate the monthly payment for each loan individually. Round to the nearest dollar amount (no decimal places).

9) Loan 2 PMT:

• $116

• $106

• $126

• $96

Suppose you have the following three student loans:

Loan 1: $10,000 with an APR of 6.5% for 15 years

Loan 2: $15,000 with an APR of 7% for 20 years

Loan 3: $12,500 with an APR of 7.5% for 10 years.

Use the Loan Payment Formula to calculate the monthly payment for each loan individually. Round to the nearest dollar amount (no decimal places).

10) Loan 3 PMT:

• $148

• $138

• $128

• $118