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

question 20

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?

---

Definitions:

Exchange Rates

The rate at which one currency can be exchanged for another currency.

Capital Assets (Net)

The total value of a business's long-term assets, including property, plant, and equipment, net of accumulated depreciation.

Functional Currency

The main currency used by a business entity to conduct its economic activities and financial reporting.

Acquisition Differential

The difference between the cost of an acquisition and the fair value of the net identifiable assets of the acquired entity.