A loan with the following terms is being made: Fixed-rate, constant monthly payment. Closing date February 9th. 9% interest rate. Prepaid interest is due at closing. $70,000 mortgage loan amount. $1,500 loan discount points to be paid by the buyer/borrower to the lender. The 25-year term, monthly payments, fully amortizing.

Calculate the APR for federal truth-in-lending purposes. Do you think that the APR calculated in (a) reflects the likely return that the lender will receive over the term of the loan? List specific reasons that the lenders actual return might be different from the APR.