Some home loans 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 0.5 point is charged on a $100,000 loan,the loan repayment schedule is calculated on the $100,000 loan,but the net amount the borrower receives is only $99,500.What is the effective annual interest rate charged on such a loan,assuming that loan repayment occurs over 360 months,and that the interest rate is 1% per month?

Question

Quizplus · Accepted Answer

The Answer of Some home loans 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 0.5 point is charged on a $100,000 loan,the loan repayment schedule is calculated on the $100,000 loan,but the net amount the borrower receives is only $99,500.What is the effective annual interest rate charged on such a loan,assuming that loan repayment occurs over 360 months,and that the interest rate is 1% per month?

Some Home Loans Involve "Points," Which Are Fees Charged by the Lender.Each