A mortgage banker is originating a level-payment mortgage with the following terms:
Annual interest rate: | 9.0 percent |
Loan term: | 15 years |
Payment frequency: | Monthly |
Loan amount: | $160,000 |
Total up-front financing costs |
|
(including discount points): | $4,000 |
Discount points to lender: | $2,000 |
a. Calculate the annual percentage rate (APR) for Truth-in- Lending purposes.
b. Calculate the lender’s yield with no prepayment.
c. Calculate the lender’s yield with prepayment in five years.
d. Calculate the effective borrowing cost with prepayment in five years.
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