Question

year amortization period with monthly payments. The lender charges three discount points. What is the A borrower is offered a mortgage loan for $100,000 with an interest rate of 10 and a effective interest rate if the loan is held to maturity? 1.10.37 2.9.999 4.10

Answer 1

1. 10.37%

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

C В 1 Mortgage Laon Discount Points Total Mortgage Loan $100,000.00 2 3% $103,000.00 4 30 Term in years 10% APR 6 7 $903.90 Monthly payment 8 9 10.35% Effective interest rate 10 11 12 13 st LC LC

Cell reference -

A В C 1 Mortgage Laon Discount Points Total Mortgage Loan Term in years 2 100000 0.03 =C2* (1+C3) 4 30 APR 6 0.1 7 ЕРМТ(С6/12,C5*12,-С4,0) Monthly payment 8 =RATE (C5*12,-C8,C2,0)*12 Effective inte rest rate 10 11 12 LO

Please note: a slight difference might be due to rounding off.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.