Question

You have just purchased a new warehouse. To finance the purchase, you've arranged for a 30-year mortgage loan for 80 percent of the $2,600,000 purchase price. The monthly payment on this loan will be $12,200. What is the interest rate on this loan?

Answer 1

Annual interest rate is 5.80%

Step-by-step explanation:

For this question, we use the Rate formula that is shown on the attached excel spreadsheet

Given that,

Present value = $2,600,000 × 80% = $2,080,000

Assuming figure - Future value or Face value = $0

PMT = $12,200

NPER = 30 × 12 months = 360

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the annual interest rate is 5.80%