Main content EAR versus APR [LO4] Two banks in the area offer 30-year, $320,000 mortgages at 4.9 percent and charge a $5,500 loan appication fee. However, the application fee charged by Insecurity Bank and Trust is refundable if the loan application is denied, whereas that charged by I.M. Greedy and Sons Mortgage Bank is not. The current disclosure law requires that any fees that will be refunded if the applicant is rejected be included in calculating the APR, but this is not required with nonrefundable fees (presumably because refundable fees are part of the loan rather than a fee). What are the EARS on these two loans? What are the APRs?

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
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EAR versus APR [LO4] Two banks in the area offer 30-year, $320,000 mortgages at 4.9 percent and charge a $5,500 loan
appication
fee. However, the application fee charged by Insecurity Bank and Trust is refundable if the loan application is
denied, whereas that charged by I.M. Greedy and Sons Mortgage Bank is not. The current disclosure law requires that any
fees that will be refunded if the applicant is rejected be included in calculating the APR, but this is not required with
nonrefundable fees (presumably because refundable fees are part of the loan rather than a fee). What are the EARS on
these two loans? What are the APRs?
Transcribed Image Text:Main content EAR versus APR [LO4] Two banks in the area offer 30-year, $320,000 mortgages at 4.9 percent and charge a $5,500 loan appication fee. However, the application fee charged by Insecurity Bank and Trust is refundable if the loan application is denied, whereas that charged by I.M. Greedy and Sons Mortgage Bank is not. The current disclosure law requires that any fees that will be refunded if the applicant is rejected be included in calculating the APR, but this is not required with nonrefundable fees (presumably because refundable fees are part of the loan rather than a fee). What are the EARS on these two loans? What are the APRs?
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