Tim wants to buy an apartment that costs $1,500,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 3.75%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. The index was 1% at the time of origination and remained at 1% during every rate reset. Tim also had to pay 3.0 points for this loan.

Compute the true APR (annualized IRR) for this loan. Assume the rate resets after 36 months and then remains constant for the remainder of the loan term.