HW #2 Problem #1

Effective Borrowing Costs, Lender's Yeild, and Ballon Payments Bronco Mortgage has offered you a $95,000.00, 30-year, fixed-rate mortgage at 6.00 percent interest with 1.5 points. In addition, Bronco Mortgage will charge $750.00 in processing fees to originate the loan. a) What is the required monthly payment on this mortgage? b) Assuming that you hold this loan until maturity, what is the effective borrowing cost (EBC) on this mortgage? c) What is the EBC if you are only going to hold this loan for five years? Explain the difference between your answer here and your answer in part (a)