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.
Discountpoints 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.