# A mortgage banker is originating a level-payment mortgage with the following terms: Annual interest rate: ....................... 9 percent Loan term: ..................................... 15 years Payment frequency: ....................... monthly Loan amount: ................................ $160,000 Total up-front financing costs (including discount points): .... $4,000

A mortgage banker is originating a level-payment mortgage with the following terms:

Annual interest rate: ....................... 9 percent

Loan term: ..................................... 15 years

Payment frequency: ....................... monthly

Loan amount: ................................ $160,000

Total up-front financing costs (including discount points): .... $4,000

Discount points to lender: ................. $2,000

a. Calculate the annual percentage rate (APR) for Truth-in-Lending purposes.

b. Calculate the lender’s yield with no prepayment.

c. Calculate the lender’s yield with prepayment is five years.

d. Calculate the effective borrowing costs with prepayment in five years.

Annual interest rate: ....................... 9 percent

Loan term: ..................................... 15 years

Payment frequency: ....................... monthly

Loan amount: ................................ $160,000

Total up-front financing costs (including discount points): .... $4,000

Discount points to lender: ................. $2,000

a. Calculate the annual percentage rate (APR) for Truth-in-Lending purposes.

b. Calculate the lender’s yield with no prepayment.

c. Calculate the lender’s yield with prepayment is five years.

d. Calculate the effective borrowing costs with prepayment in five years.

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