Monthly Payment, Inflation Rate, After-tax Rate
1. If Bank One is offering a 30 year mortgage with and EAR of 5 3/8 %. If you plan to borrow $150,000, what will your monthly payment be?
2. If the rate of inflation of 5%, what nominal interest rate is necessary for you to earn a 3% real interest rate on your investment?
3. Your best taxable investment opportunity has an EAR of 4%. You best tax-free investment opportunity has and EAR of 3%. If your tax rate is 30%, which opportunity provides the higher after-tax interest rate?