#1322

A lender charged a borrower 6% for the loan plus 6 discount points.

The yield to the lender for the loan is 6.25%.

Is this fact true or false ?

Take your time. The solution is posted below the wildlife photo.

wildlife

A. False

Discount points are a percentage of the amount of the loan.

One point will equal 1 percent of the loan.

Discount points raise the yield to the lender.

Each point raises the yield by 1/8th of a percent.

1/8th is equal to .0125 of a percent.

6 points are 6 times .0125 which equal .75

The lender's yield will be 6.75 percent or 6 and 3/4 percent.

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Posted by David Saks on 09/26/2011 02:50 AM   Comments (0)   Theory and Practice in the ActiveRain Channel   theory and practice  
Originally posted at: David Saks: Real Estate Practice : Lesson 1322
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