384 A B C D E F 385 A lender is offering a 30-year, monthly payment...

 

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384 A B C D E F 385 A lender is offering a 30-year, monthly payment fixed rate mortgage (FRM) loan at 4.5% with an $800 origination fee and 386 2.5 discount points. A borrower wants a loan for $538,000. What is the yield to the lender, the effective borrowing cost 387 to the borrower, and the APR assuming the borrower prepays the loan balance at the end of year 6? Use both the IRR 388 function in the green highlighted cell as indicated. 389 390 391 Loan Amount 392 Annual Interest Rate $538,000.00 4.50% 393 Origination Fee $800.00 394 Discount Points 2.50% 395 Maturity (in years) 30 396 Periods per year 397 Prepayment Month 398 Monthly Payment 399 Balance at EOY 6 $479,565.06 12 72 $2,725.97 G H I J Using IRR Function Yield to Lender Effective borrowing cost to borrower APR (this is tricky, be careful) -28.05% -28.05% -28.05% Using RATE Function Yield to Lender 5.04% Effective borrowing cost to borrower APR (this is tricky, be careful) 5.04% 5.04% Month Cash Flow 0 -$523,750.00 $2,725.97 400 401 402 403 404 405 406 407 12345 $2,725.97 $2,725.97 $2,725.97 $2,725.97 408 6 $2,725.97 409 7 $2,725.97 410 8 $2,725.97 411 9 $2,725.97 412 10 $2,725.97 413 11 $2,725.97 384 A B C D E F 385 A lender is offering a 30-year, monthly payment fixed rate mortgage (FRM) loan at 4.5% with an $800 origination fee and 386 2.5 discount points. A borrower wants a loan for $538,000. What is the yield to the lender, the effective borrowing cost 387 to the borrower, and the APR assuming the borrower prepays the loan balance at the end of year 6? Use both the IRR 388 function in the green highlighted cell as indicated. 389 390 391 Loan Amount 392 Annual Interest Rate $538,000.00 4.50% 393 Origination Fee $800.00 394 Discount Points 2.50% 395 Maturity (in years) 30 396 Periods per year 397 Prepayment Month 398 Monthly Payment 399 Balance at EOY 6 $479,565.06 12 72 $2,725.97 G H I J Using IRR Function Yield to Lender Effective borrowing cost to borrower APR (this is tricky, be careful) -28.05% -28.05% -28.05% Using RATE Function Yield to Lender 5.04% Effective borrowing cost to borrower APR (this is tricky, be careful) 5.04% 5.04% Month Cash Flow 0 -$523,750.00 $2,725.97 400 401 402 403 404 405 406 407 12345 $2,725.97 $2,725.97 $2,725.97 $2,725.97 408 6 $2,725.97 409 7 $2,725.97 410 8 $2,725.97 411 9 $2,725.97 412 10 $2,725.97 413 11 $2,725.97

Answer rating: 100% (QA)

Okay lets solve this stepbystep 1 Loan amount 538000 2 Annual interes... View the full answer