14 Problem 6-62 Calculeting EAR with Points [LO4] You are looking at a one-year

Question

14 Problem 6-62 Calculeting EAR with Points [LO4] You are looking at a one-year loan of $14.500. The interest rate is quoted as 9.9 percent plus three points. A point on a loan is 1 percent (one percentage point) of the loan amount. Quotes similar to this one are common with home mortgages. The interest rate quotation in this example requires the borrower to pay three points to the lender up front and repay the loan later with 9.9 percent interest ints eBook Print What rate would you actually be paying here? (Do not round intermediate calculations Referencesand enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Interest rate%

Explanation / Answer

amount received=14500*(1-3%)=14065

reayment at end of year=14500*(1+9.9%)=15935.50

interest rate=(15935.50/14065)-1

=13.30%

the above should be answer..

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