you start a private mortgage lending firm that targets high net worth borrowers. the idea is that offering loans with relatively low rates paired with relatively high origination fees you will attract borrowers who have a good amount of wealth on hand and a lower likelihood of default. the typical loan amount is 750000 where payments are amortized over a 30 year period based on a 4.5 mortgage rate.

a) if you charge 3.5 points at origination and expect the borrower to hold the mortgage to maturity, what is your return on lending

b) based on your extensive research you estimate a typical loan is 8 years. if you charge 3.5 points at origination and expect the borrower to pay off mortgage at the end of eight years what is your return on lending.