Question
(8 points) Suppose a borrower takes out a $175,000 fixed rate, 30-year mortgage with an annual interest rate of 4.75%, paid monthly. The borrower pays
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(8 points) Suppose a borrower takes out a $175,000 fixed rate, 30-year mortgage with an annual interest rate of 4.75%, paid monthly. The borrower pays $4,500 in up-front financing fees and the lender charges 2.5 discount points.
(8 points) Suppose a borrower takes out a $175,000 fixed rate, 30-year mortgage with an annual interest rate of 4.75%, paid monthly. The borrower pays $4,500 in up-front financing fees and the lender charges 2.5 discount points.
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(2 points) What is the Effective Borrowing Cost (EBC)?
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(2 points) What is the Lenders Yield?
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(1 point) The expected cost of the loan to the borrower is _______ than the expected yield.
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(3 points) Provide an intuitive explanation for your answer in d) using 2-4 sentences. Your answer should use at least 2 key terms from class.
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Finance Plain And Simple
Authors: Sebastian Nokes
1st Edition
0273731297, 978-0273731290
