The Gills have arranged a second mortgage loan with a face value of $21,500 at an interest rate of 6 5 compounded monthly The face value is to be fully amortized by equal monthly payments over a five year period The Gills received only $20,000 of the face value, the difference being a bonus retaine...

The monthly payments are based on PV 21500 n 60 and i 6512 05416 Substitute i ...

The Gills have arranged a second mortgage loan with a face value of $21,500 at an interest

Question:

The Gills have arranged a second mortgage loan with a of $21,500 at an interest rate of 6.5% compounded monthly. The is to be fully amortized by equal monthly payments over a five-year period. The Gills received only $20,000 of the the difference being a bonus retained by the lender. What is the actual cost of borrowing, including the bonus, expressed as an effective interest rate?
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...