annual interest rate
Question
I’m having an issue with finding the effective annual interest rate. The problem that I have is as
follows:
| Home loans typically involve “points,” which are fees charged by the lender. Each point charged means that the borrower must pay 1% of the loan amount as a fee. For example, if the loan is for $140,000 and 4 points are charged, the loan repayment schedule is calculated on a $140,000 loan but the net amount the borrower receives is only $134,400. Assume the interest rate is .75% per month. What is the effective annual interest rate charged on such a loan, assuming loan repayment occurs over 192 months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel.) |
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