Given the following information about a fully amortizing loan, calculate the lender's yield (rounded to the nearest tenth of a percent). Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Monthly Payment: $1,225.00, Discount points: 2.
A)7.7%
B) 8.0%
C) 8.2 %
D)10.0 %

Question

Quizplus · Accepted Answer

To calculate the lender's yield, we need to first calculate the total amount of interest that will be paid over the life of the loan. We can do this by multiplying the monthly payment by the number of payments (30 years x 12 months/year = 360 months) and then subtracting the loan amount:

$1,225 x 360 - $166,950 = $305,550 - $166,950 = $138,600

Next, we need to subtract the discount points from the loan amount and add them to the total interest to get the total amount of money the lender will receive:

$166,950 - (2% x $166,950) + $138,600 = $303,894

Finally, we can calculate the lender's yield by dividing the total interest received by the amount loaned and expressing it as a percentage:

($303,894 - $166,950) / $166,950 = $136,944 / $166,950 = 0.820 or 8.2%

Therefore, the answer is C.

Given the Following Information About a Fully Amortizing Loan, Calculate