Consider the following mortgage:

• Term: 360 months
• Required discount rate/yield (contract rate): 7%
• Initial loan balance: $150,307.57
  • Then monthly payment= $1,000
• Discount points = 3.53% (points dollar = $5,307.57)
  • Net loan proceeds = $145,000

1. Given the deal, what is the lender yield?

Now, in addition to the discount points, there are other un-front closing cost to the borrower. The amount is $1,692.43. So total deducted from borrowers loan proceeds at closing is $7,000 ($5,307.57 + $1,692.43).

2. Whats the effective borrowers cost of the loan?

For the following questions, suppose the loan will be prepaid at the end of 10 years (120 months) instead of 360 months.

3. Whats the loan balance at the end of 10 years?
4. Whats the lenders yield?
5. Whats the effective borrowing cost?

Please show work.