Suppose you borrow $180,000 at 6% for 30 years, monthly payments with two discount points. Your...

Suppose you borrow $180,000 at 6% for 30 years, monthly payments with two discount points. Your mortgage contract includes a prepayment penalty of 4% over the entire loan term.
A. (1 pt) What is the APR of this loan?
B. (1 pt) What is the effective cost if you prepay the loan at the end of year five?

Solutions

Expert Solution

Part A: APR of the loan= 6.189476%

Part B: Effective cost if prepaid at the end of 5 years= 7.132898%

Calculation as below:

jeff jeffy answered 2 years ago

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