Question 4: Suppose that a lender is considering lending money to a borrower. However, based on the borrowers risk profile, the lender is only willing to lend if the lender can ensure a lender's yield of 14%. As such the lender offered the borrower the opportunity to borrow $400,000 using a 30 year fixed rate, constant monthly payment fully amortizing mortgage with a contract rate of 14% and no origination fees whatsoever. Further, the borrower indicated that he or she will repay the loan after 10 years.

The borrower however denied and indicated to the lender that he or she was only interested in financing with them if they could reduce the contract rate from 14% to 13%. How much money would the lender have to collect from the borrower up front in terms of origination fees in order to ensure a lender's yield of 14% if the lender lends money to the borrower at a contract rate of 13%. Please enter this amount in the numerical box below as a dollar figure rounded to 2 decimals. For instance, if the total fees amount to $1526.36 simply enter 1526.36.