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The initial interest rate on a 25y, $500,000 mortgage loan is 6%. The loan officer suggests that you can purchase 3% discount points and reduce
The initial interest rate on a 25y, $500,000 mortgage loan is 6%. The loan officer suggests that you can purchase 3% discount points and reduce the rate to 4%. Purchasing points also involves $2000 worth of your time for extra research and paperwork. You know that the expected holding period for this loan is only six years. What is the annual rate of return (RR) on the total initial costs?
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