A loan for $53,000 is made for 10 years at 8 percent interest and no monthly payments will be due (assuming monthly compounding). a. How much will be due at the end of 10 years? b. What will be the yield to the lender if it is repaid after eight years? c. If 4 point is charged to the yield, what will be the new yield to the lender?

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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.