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

question 56

Essay

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? (Round the monthly payment amount to 2 decimal places.)

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Definitions:

Eyewitness Memory

The recall of individuals who have witnessed a particular event or crime, concerning their ability to remember and report details accurately.

High Confidence

The strong belief or certainty in one's abilities, decisions, or correctness of information.

Jurors

Members of a jury, who are individuals selected to make a decision or find facts in legal proceedings.

Accurate Memory

The ability to recall past events, information, or experiences with high fidelity and precision, with minimal errors or distortions.