1.Biggie Bank is going to charge you a 2 point origination fee on the loan descr

Question

1.Biggie Bank is going to charge you a 2 point origination fee on the loan described in Problem #1. What is Biggie Bank’s yield on this loan if you pay it off over its full term (to 3 decimal places)? 1.What would the lender’s yield be if you pay off the loan in 18 months (to 3 decimal places)?

** Problem one information is as follows:

Pv= 3,840,000

Fv=0

PMT= -43,602.42

N= 120 ( 10*12)

i= 6.5

Number one question is: 1.You decide to buy the Park West Corporate Center in Round Rock for $4,800,000. You have $960,000 to use as a down payment and have applied for a $3,840,000 mortgage loan from Biggie Bank. The loan will have a 10 year term, be fully amortizing, and have fixed interest rate of 6.5% per annum. What is your monthly payment on the loan? ( the answer is above)

For the yield for 18 months, I keep getting a I= 155.678. I don't think that is realistic.

the 2 orgination fee is basically 2% off teh 3,840,000. I got 3,763,200 for PV.

The set up for the 18month question is:

PV=3,763,200

FV=0

PMT=-43,602.42

N= 18 (12*1.5)

I= 155.678% ???? I don't know if this is right.

Explanation / Answer

We are 95% confident that the population difference between these proportions is between –13.37% and 15.55%.

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