A lender is considering what terms to allow on a loan. Current market terms are 9 percent interest for 25 years for a fully amortizing loan. The borrower, Rich, has requested a loan of $105,000. The lender believes that extra credit analysis and careful loan control will have to be exercised because Rich has never borrowed such a large sum before. In addition, the lender expects that market rates will move upward very soon, perhaps even before the loan is closed. To be on the safe side, the lender decides to extend to Rich a CPM loan commitment for $99,750 at 9 percent interest for 25 years; however, the lender wants to charge a loan origination fee to make the mortgage loan yield 10 percent.

Required:

a. What origination fee should the lender charge?

b. What fee should be charged if it is expected that the loan will be repaid after 10 years?

A lender is considering what terms to allow on a loan, Current market terms are 9 percent interest for 25 years for a fully anvotizing loatr. The borrower, Rich, has requested a kan of $105,000. The lender belleves that extra ciedit analysis and careful loain contiol will have to be txerclsed because Rich has never bortowed such a large sum before. in addition. the lender expects that market rates will move upward very soon, perhaps even before the loan is closed. To be on the sate side, the fender dockos fo extend to. Fich a CPM Ioan commltment for $99,750 at 9 percent interest for 25 years; bowever, the lender wants to charge a loan origination tee to make the rortgage kan yield 10 percent. Required: a. What origination fee should the lender charge? b. What fee should be charged if it is expected that the foan will be repakd aftes 10 years? (For all requirements, do not round intermediete colculations ond round your final answers to 2 decimal places.)