For the following three questions consider a 250K loan with a 8% nominal interest rate compounded weekly. The term of the loan is 10 years. Per our class contract please assume 12 months in a year, 52 weeks in a year and 4 weeks in a month.

**1.) What is the effective annual interest rate of this loan?**

a.) 8.00%

b.) 8.32%

c.) 0.67%

d.) None of the above

To find the effective annual interest Rate you begin by using the formula:

(1)n = compounding periods in desired period = 52

p = number of compound periods = 52

i = nominal interest rate = 8%

Therefore

(2)**2.) What would your weekly payments be on this loan?**

a.) $738.68

b.) $698.80

c.) $1721.02

d.) 20,000.00

To find the weekly payments you must solve the following equation.

A=(A\P,i,N)

Plugging in known values for P,i,n

A=$250000(A\P,.08/52,52*10)

**3.) What would your monthly payments be?**

a.) $2,083.33

b.) $2795.20

c.) $2,954.73

d.) $20,000.00

To find your monthy payments you must begin by recalculationg your Effective Interest Rate:

(4)n = compounding periods in desired period = 4

p = number of compound periods = 52

i = nominal interest rate = 8%

Therefore

*EIR* = (1+.08/52)^{4}-1 = .006168 = .6168%

Now to solve to find your montly payments you need to solve for the following:

A=(A\P,i,N)

Plugging in known values for P,i,n

A=$250000(A\P,.006168,12*10)