Question

In: Finance

4. A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of...

4. A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus 2 points. What is the effective annual interest rate on the loan if the loan is carried for all 30 years?
(A) 6.0%
(B) 6.2%
(C) 6.4%
(D) 6.6%

Solutions

Expert Solution

I HAVE SOLVED MANY SUMS. SOME BOOKS ARE WRITING ANNUAL EFFECTIVE COST AS "APR" AND SOME BOOKS "EAR". HERE CONFUSION IS WHAT TO TAKE BECAUSE APR = 6.2% AND EAR = 6.4%

HERE I AM TAKING IT AS EAR = (C) = 6.4%. THANK YOU


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