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.

PART B- 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. $2,887 (2.9 dp)

e. $1,887 (1.9 dp)