1. Your local lender offers you a fixed-rate mortgage with the following terms: $250,000 at 5.25%...

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1. Your local lender offers you a fixed-rate mortgage with the following terms: $250,000 at 5.25%...

1. Your local lender offers you a fixed-rate mortgage with the following terms: $250,000 at 5.25% for 30 years, monthly payments. The lender will charge you two discount points and the loan has a 4% prepayment penalty for the first 8 years of life.

A. (1 pt) What is the annual percentage rate (APR) of the loan?

B. (1 pt) What is the effective cost if you prepay the loan at the end of year five?

C. (1 pt) Suppose that your effective cost over a five-year holding period is 6.50%. What amount of other fees did you pay?

D. (1 pt) If you paid $1,500 in other fees, how many discount points are required to yield an APR of 5.75%?

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Answer 1

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Solution Particulous 2.50.000 Loan Rate of intrest Tenure period time I periods intial charges 5.25 30 years 360 moually Clos 8) APR i for pre payment after 5 tears $ 2,34,98116 FV after 5 yeary $ 9,399-25 Total to be paid to close the loan. $ 2,04 38

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1. Your local lender offers you a fixed-rate mortgage with the following terms: $250,000 at 5.25%...

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