Posted by Tuty on Sunday, August 3, 2008 at 6:15pm.
You decide to purchase a building for $30,000, you put $5,000 down payment. The banks offers you a 15 yr mortgage requiring annual end of year payments of $3,188. The bank also requires you to pay a 3% loan originatio fee. Compare the annual % rate of interest on this loan.
Financial Management - Ms. Sue, Sunday, August 3, 2008 at 6:28pm
Your mortgage is for $25,000.
$3,188 * 15 = $4,782
Origination fee = 0.03 * $25,000 = $750
$4,782 + 750 = $5,532
5,532 / 2500 = ??
Financial Management - Tuty, Sunday, August 3, 2008 at 7:00pm
Thanks for your help :)
Financial Management - Ms. Sue, Sunday, August 3, 2008 at 7:16pm
Fiancial Management - drwls, Sunday, August 3, 2008 at 6:35pm
Since you had to pay a loan origination fee of 3% of 25,000 or $750, you really received only 24,250 at the begining of the loan. Figure the A.P.R using a loan amortization program, as whatever interest rate pays off a $24,250 loan in 15 annual payments of $3,138.
Using the computation tool at
I get an annual percentage rate of 10.0%
Fiancial Management - Tuty, Sunday, August 3, 2008 at 7:03pm
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