Assume the following:

Loan amount: $200,000

Interest rate: 10 percent annually (compounded monthly)

Term: 10 years

Amortization period: 25 years

Payment frequency: Monthly

Discount points (fees): 2 points or 2% of the initial loan amount

Other up-front financing costs

paid to the lender (including 0.5%

loan origination fee): $3,000

Up-front financing cost paid to

appraisal firms: $2,000

1. What is the monthly payment? (2 points)
2. What will be the loan balance at the end of nine years? (2 points)
3. What will be the interest payment amount in the payment that will be paid at the end of nine years? (1 point)
4. What is the lenders yield on the loan if the loan goes to maturity? (2 points)
5. What is the effective borrowing cost on the loan if the loan goes to maturity? (2 points)
6. What is the lenders yield on the loan if the loan is prepaid at the end of year 9? (2 points)
7. What is the effective borrowing cost on the loan if the loan is prepaid at the end of year 9? (2 points)