A lender makes a loan of $100,000 at a 6% interest rate for 25 years with monthly payments. The lender will require an origination fee of $1,000 and will also discount the loan by some amount. The monthly payment is $644.30

1. By what amount must the lender discount the loan such that the effective interest rate would be 8%, assuming the mortgage will be sold at par one year after closing? (How many discount points will the lender charge)? a. $743 (0.74 dp)

b. $901 (0.9 dp) c. $1,000 (1 dp) d. $1,887 (1.9 dp) e. $2,887 (2.9 dp)

2. Suppose the lender discounts the loan by the amount calculated in the last question. What is the annual percentage rate (APR) on this loan? a. 5.45% b. 6.00% c. 6.11% d. 6.20% e. 6.65%