Chapter 16, Problem 38P

The bank charges $4,000 for closing costs on a $200,000 loan with an APR of 8.5% compounded monthly with a term of 30 years. The bank will not allow the closing costs to be added to the $200,000 borrowed. What effect do the closing costs have on the effective annual interest rate?

If the loan in Problem 36 is paid off at the end of the tenth year (at the time of the 120th payment) what effect does this have on the effective annual Interest rate?