THREE BONUS EXAMPLES 47 Fee, 1. Compute th monthly payment of a $80,000 loan using the APR. ment is the amount of the check you will i pay! is the snd to the lender. PV = —80,000 N=30x12 T= aaaafi2 SAAR vnelotles fees FV =0 PMT => 402.69 2. Given that monthly payment and QI compute the present value of the loan. 0x 12 15/12 A Hew nen ALR ‘Therefore you are being charged $653.43 ‘ on Bankrate.com). ‘Thus, an $80,000 loan at the APR of 4.444% is the same as an $80,653.43 at the quoted interest rate of 4.375%. After you sign the closing papers you will have an $80,653.43 loan if you do not pay the $653.43 fees at closing. Now your turn to repeat the ealeulations for the other lenders. In Step #1 the fees are included (embedded) in the APR. In Step #2 the fees are explicitly included in the loan amount. Tn both cases fees are accounted for ju to use the higher APR and the higher loan amount simultancously. Fees oul ot oF feel PV: - 40,000 [v= ~(go2t -398)= - 2740S W* 30x12 M2 350A . ae agrrel. pee ag yy b> REF fv=0 Fvz0 tars (SEZ) pM 374292 fee, > G0g0~ 274,407.94 GUS Close enough te BIS