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A borrower takes out a 30 -year mortgage loan for $250,000 with an interest rate of 5% APR compounded monthly with level monthly payments.There is
A borrower takes out a 30 -year mortgage loan for $250,000 with an interest rate of 5% APR compounded monthly with level monthly payments.There is also a 2% Origination Fee so at the very beginning, she receives 250,00098%=245,000. Assume she will pay the loan for 30 years following the original loan schedule. What would be the Effective Annual Rate (EAR)? Hints: 1. Monthly Payment is based on $250,000; 2. with Excel Rate function, calculate the Effective Monthly Rate (EMR), here PV is what the borrower actually receives (after deduction of 2% ) 3. then EAR=(1+EMR)121 5.30% 5% 4.70% Not enough information
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