If the loan in Problem 21 is paid off at the end of the tenth year (at the time of the 120th payment) what effect does this have on the effective annual interest rate?
In Problem 21, the bank charges $4,000 for closing costs on a $200,000 loan with an annual percentage rate of 8.5% compounded monthly with a term of thirty years. The bank will not allow the closing costs to be added to the $200,000 borrowed. What effect do the closing costs have on the effective annual interest rate?