Answer:
Monthy payment will be of $536.99. The loan's EAR is 8.72%.
Explanation:
To solve this exercise, you first has to convert the nominal rate to real rate with this formula: i=(1+r/m)^m−1
i=(1+0.1/12)^12−1
i=0.104713
I=i×100=10.4713%
To calculate the loan monthly payment, you need to calcualte the monthy rate (10.41/12)=8.72
With this, yu calculate the discount factor D, using the number of periodic payments (60) and the rate:
D=((1+r)^n-1)/(r*[(1+r)^n]
D=(((1+0.008726)^60)-1)/(0.008726*(1+0.008726)^60)=46.56
Finally, yo calculate the loan payment by: A/D=25,000/46.56=536.99
