Sheri Dan has applied for a mortgage from a Canadian bank

A) Computation of the effective annual rate (EAR):-

EAR = (1+rate/n)^n-1

= (1+8%/2)^2-1

= 1.0816 - 1

= 8.16%

B) We can calculate the monthly payments by using the following formula in excel:-

=pmt(rate,nper,-pv,fv)

Here,

Pmt = Monthly payments

Rate = 8.16%/12 = 0.68% (monthly)

Nper = 22*12 = 264 periods (monthly)

PV = $160,000

FV = $0

Substituting the values in formula:

= pmt(0.68%,264,-160000,0)

= $1,306.29 Or $1,306

C) We can calculate the weekly payments by using the following formula in excel:-

=pmt(rate,nper,-pv,fv)

Here,

Pmt = Weekly payments

Rate = 8.16%/52 = 0.1569% (weekly)

Nper = 22*52 = 1144 periods (weekly)

PV = $160,000

FV = $0

Substituting the values in formula:

= pmt(0.1569%,1144,-160000,0)

= $301.17 Or $301

D) We can calculate the bi-weekly payments by using the following formula in excel:-

=pmt(rate,nper,-pv,fv)

Here,

Pmt = Bi-weekly payments

Rate = 8.16%*2/52 = 0.3138% (Bi-weekly)

Nper = 22*52/2 = 572 periods (Bi-weekly)

PV = $160,000

FV = $0

Substituting the values in formula:

= pmt(0.3138%,572,-160000,0)

= $602.45 Or $602