Answer to Question #59772 in Economics for Doug

Question

Mary borrows $80,000 to buy her home. Beginning next month she will pay the
lender $720 per month for the next 20 years. What is the ROR? (Hint: 20 years = 240
months. Calculate the monthly interest rate first, then multiply by 12 to obtain the annual
percentage rate, APR).

Answer 1

Mary borrows $80,000 to buy her home. Beginning next month she will pay the lender $720 per month for the next 20 years.
To calculate ROR firstly we should calculate the monthly interest rate i = 720/80,000*100% = 0.9%.
The annual percentage rate, APR = 0.9%*12 = 10.8%.
So, ROR = APR = 10.8%.