A lender is considering what terms to allow on a loan. Current market terms are 9 percent interest for 25 years for a fully amortizing loan. The borrower, Rich, has requested a loan of $116,000. The lender believes that extra credit analysis and careful loan control will have to be exercised because Rich has never borrowed such a large sum before. In addition, the lender expects that market rates will move upward very soon, perhaps even before the loan is closed. To be on the safe side, the lender decides to extend to Rich a CPM loan commitment for $110,200 ot 9 percent interest for 25 years; however, the lender wants to charge a loan origination fee to make the mortgage loan yield 10 percent. Required: a. What origination fee should the tender charge? b. What fee should be charged it it is expected that the loan will be repaid after 10 years? (For all requirements, do not round Intermediate calculations and round your final answers to 2 decimal places.) a Loan ongination fee-25 year loan b. Loan origination fee-10 year loan

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A: Discussion of major characteristics of a theory

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.