Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question

Transcribed Image Text:8.
Lone Watie is considering a possible mortgage, arranged through a mortgage broker. It will have a
face value of $3,500,000 with a contract rate of j₂ = 10%, 25-year amortization period, 6-year term,
and monthly payments rounded up to the next higher $100. The mortgage broker will charge a
brokerage fee of 3% of the loan's face value which will be deducted from the face value of the loan.
What effective annual interest rate will Lone Watie be paying on the funds advanced?
(1) 11.060915%
(2) 10.495351%
(3) 11.015229%
(4) 11.639249%
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