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Suppose that you are considering a loan in which you will borrow $325,000 using a 30-year loan. The loan has an annual interest rate of 6% with monthly payments and monthly compounding. Suppose also that the lender is charging you a 0.5% origination fee, you are paying 1.5 points in order to get the 6% interest rate, and the loan has $775 in third-party closing costs associated with it. a. What will the effective borrowing cost be for this loan if you make all of the scheduled payment? b. What will the lender’s yield be for this loan if you make all of the scheduled payments? c. What will the effective borrowing cost be for this loan if you pay off the loan at the end of the 4th year?

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Financial Management, Finance

Category:- Financial Management
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