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?

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Definitions:

Traditional Authority

Authority based in custom, birthright, or divine right.

Max Weber

A German sociologist, philosopher, and political economist known for his theories on the structure of society, the nature of authority, and the role of religion in capitalism.

Typology of Power

A classification of different forms of authority and influence, ranging from coercive to soft power, used to analyze dynamics within societies.

Coercive Power

Power that is backed by the threat of force.