Principal of $259 000 on a House Is Mortgaged at a Rate

question 89

Essay

Principal of $259 000 on a house is mortgaged at a rate of 3.7% amortized over a period of 25 years resulting into a total interest of $137 178.49. The bank also offers simple interest for the customers, who do not want to pay compound interest. If bank wishes to earn the same amount of interest over the period of 25 years, what rate will the bank charge to its customers, if the loan is paid in equal annual installments?

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Definitions:

C2C Cycle

The cycle within consumer-to-consumer transactions, from one individual to another, typically facilitated by third-party platforms.

Accounts Payable

The amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Return On Assets

A financial ratio indicating how profitable a company is relative to its total assets, measuring efficiency in using assets to generate earnings.

Earnings Before Interest And Taxes

A financial metric indicating the profitability of a business before accounting for interest and tax expenses.