3. You want to borrow a 6.5%, 15 year constant payment mortgage (CPM) in the amount of $120,000. Assuming you will make monthly payment to fully amortize the loan, besides the 2 points, if the lender also charges 3% prepayment penalty, what is the EAR of the loan if paid off in 4 years? A. 6.50% B. 6.82% C. 7.21% D. 7.71%

4. You want to borrow a 6.5%, 15 year constant payment mortgage (CPM) in the amount of $120,000. Assuming you will make monthly payment to fully amortize the loan, how many points must the lender charge in order for the loan to have an APR of 7%? A. 2.5 points B. 3.0 points C. 3.5 points D. 4.0 points