lortgage with Points. Home loans sometimes involve "points," which are es charged by the lender. Each point charged means that the borrower ust pay 1% of the loan amount as a fee. For example, if the loan is for $100,000 nd 2 points are charged, the loan repayment schedule is calculated on a $100,000 pan but the net amount the borrower receives is only $98,000. Assume the interest ate is 1% per month. What is the effective annual interest rate charged on such a ban, assuming loan repayment occurs over 360 months? (LO5-4)

lortgage with Points. Home loans sometimes involve "points," which are es charged by the lender. Each point charged means that the borrower ust pay 1% of the loan amount as a fee. For example, if the loan is for $100,000 nd 2 points are charged, the loan repayment schedule is calculated on a $100,000 pan but the net amount the borrower receives is only $98,000. Assume the interest ate is 1% per month. What is the effective annual interest rate charged on such a ban, assuming loan repayment occurs over 360 months? (LO5-4)

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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You are looking at a one-year loan of $18,000. The interest rate is quoted as 7.4 percent plus two points. A point on a loan is 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. The interest rate quotation in this example requires the borrower to pay two points to the lender up front and repay the loan later with 7.4 percent interest. a. What rate would you actually be paying here? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the EAR for a one-year loan with a quoted interest rate of 10.4 percent plus two points? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Interest rate b. EAR 9.41 % 10.61 % Is your answer affected by the loan amount? No Yes
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Use PMT = to determine the regular payment amount, rounded to the nearest dollar. The price of a home is $181,000. The bank requires a 20% down payment and three points at the time of closing. The cost of 1- the horme is financed with a 30-year fixed-rate mortgage at 7.5%. Complete parts (a) through (e) below. a. Find the required down payment. b. Find the amount of the mortgage. c. How much must be paid for the three points at closing? $ (Round to the nearest dollar as needed.) d. Find the monthly payment (excluding escrowed taxes and insurance). $ (Round to the nearest dollar as needed.) e. Find the total cost of interest over 30 years. $ (Round to the nearest dollar as needed.) Next MacBook Air 8884 %23 24 % & * 2 3 4 5 6 8. 9. R. T Y D K F. S'
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