Question: Prepayment Penalties Assume that you have a $1,000,000 mortgage with monthly payments and a 25-year amortization period and a 5-year term. If the borrower were

Prepayment Penalties Assume that you have a $1,000,000 mortgage with monthly payments and a 25-year amortization period and a 5-year term. If the borrower were to sell the property at the end of the 2nd year (24 months), they will incur a 4% prepayment penalty on the unpaid outstanding mortgage balance at that time. Assume that the loan interest rate is 6%. Calculate the effective cost of borrowing (lenders yield) for this loan assuming prepayment

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