Answer to Question #320313 in Finance for anna

Question

The interest rate for the loan is an effective annual rate. Which of the following is the best next step before trying to calculate the required monthly repayment for the mortgage?

a.

Divide the rate by 12 to work in months

b.

Convert the rate to a nominal annual rate compounding monthly, and use this new rate directly to calculate the monthly repayments.

c.

No interest rate conversion is needed. The rate can be used directly.

d.

Convert the rate to an effective monthly rate, and use this rate directly to calculate the monthly repayments.

Answer 1

Divide the rate by 12 to work in months